Wall Street vs. Academics on Q3 and Q4

Given apparent gridlock in Washington – that is the gap between the administration and Senate Republicans on phase 4 recovery package – Wall Street economists and academics see the recovery somewhat differently. From the Initiative on Global Markets/FiveThirtyEight Covid panel round 10 survey (released October 12).

Figure 1: GDP actual (black bold), WSJ October survey mean (red), and IGM/Fivethirtyeight Round 10 survey median (blue). Source: BEA 2020Q3 advance, WSJ survey, IGM/Fivethirtyeight Round 10 survey, and author’s calculations.

Once again, the results are not quite comparable since the WSJ survey consensus is a mean, and the IGM/538 consensus is a median, but you get the idea (using the WSJ median makes that trajectory a bit more optimistic).



41 thoughts on “Wall Street vs. Academics on Q3 and Q4

  1. 2slugbaits

    Should we interpret forecasts like these as unconditional forecasts without regard to who wins the election? That doesn’t make sense because it’s tantamount to saying that the President and Congress are irrelevant. Given more optimistic WSJ forecasts I have to conclude that Wall Street expects Biden to win while academics, ever the nervous nellies, fear that Donald “What’s QAnon?” Trump might win.

    1. macroduck

      That tracks with the Moody’s forecasts Menzie covered a few days ago. Growth under Biden better than growth under Trump.

    2. Moses Herzog

      @ 2slugbaits
      I asked this same question in different wording in another thread. It was probably in Menzie’s most recent prior IGM/538 post. I’ll tell you, I’m siding with the academics on the forecast, and for whatever it’s worth I also see Trump’s chances of winning at around 60% (but that’s not the base reason I’m siding with the academics, and least not conscioulsy). I think the problem is the polls STILL (4 years immediately after making the same mistake) aren’t accounting for rural voters, and specifically female rural voters. It’s not phasing them at all that this is a big thing. And as much respect as I have for Nate Silver, and I do think Mr. Silver is one of the better number crunchers, I think his arrogance is blinding him on this. And at the risk of sounding like a phony Republican disingenuously talking about an “elitist liberal”, I do think this is some kind of cultural snobbery on Nate Silver’s part, that he chooses not to account for this segment of the U.S. population.

      1. Moses Herzog

        *at least not consciously.

        I’m getting sauced on a super cheap brand of Pinot Noir tonight, So I hope Menzie keeps his filter button finger limber. I don’t mind typos getting through but I hope Menzie will be kind to me in the personal embarrassment department if my mind goes over to the dark side. It usually takes bourbon or Vodka to get my mind to the dark sector, not this weak gunk though.

      2. The Rage

        I sorta doubt it. Polls are pretty good in general. Rural or nonrural. Polling showed in 2016 that a four way race to a T on what the outcome would be.

        Registered voters samples are a waste.

      3. Barkley Rosser


        Oh, I am probably not the person to argue with you about this, and I think we cannot make solid probability estimates of these things, but I think that even Silver currently has Trump’s probabiity of winning at 13%, which I suspect is too low, but I think your 60% is far too high.

        Yes, at this time four years ago, Hillary was ahead in crucial states by about the same amount Biden is now, her national polls were much tighter, and she was never above 50%, while Biden is now regularly and solidly above 50%, a lot fewer undecideds as well as a lot fewer supporting third party candidates. The woman problem was one you have long identified, that lots of people, including a lot of women, especially younger ones, seriously disliked Hillary, something you well understand as publidly open hater of her. Trump was sort of an unknown, so lots of undecideds were willing to “give him a chance” and broke for him late.

        A crucial factor in that, the crucial factor, was the Comay annuncement of the renewed FBI investigation of her emails 11 days before the election, within the two weekd period of short term memory. That is what ultimately did her in, although she was clearly a weak candidate.

        There simply not that many people who hate Joe Biden, even if he is not exciting. He is the Dem version of Gerald Ford, the not-very-exciting nice guy who promises some sort of return to at least general decency and normality after a corrupt and crazed presidency. Trump is no longer unknown, and now his personal poll ratings are awful. Those young women who stayed home because Hillary reminded them of their mean mothers are now going to show up to vote for Biden. Indecideds seem to be breaking for him, and strongly. This is even beginning to smell like a possible landslide with a major shift in the Senate, although I do not wish to get hopes up too high.

        Of course we are just about to enter that crucial two week period, and anything can happen, anything, which is one reason I think Silver’s 13% for Trump is too low. But it looks like the effort to engineer a killer October Surprise on Biden, this NY Post article on Hunter getting some Burisma guy to meet Biden, both too soon, not in the two week window, and is falling flat, so obviously a Russian fake, even as the Fox News gang and GOP senators are trying to hype it. It is goign nowhere.

        There may be something else that will pop up on Biden, alhtough this is also where him having been around for so long and so long helps. What have they got besides this silly Hunter stuff? Ooooh, court packing after this forced Barret appointment? Frankly, the way things have been going, I think it is more likely that a within-the-two-weeks October Surprise is more likely to hurt Trump than help him, although, again, anything can happen.

        1. Willie

          The only downside of refusing to talk about expanding the number of Supreme Court justices if Barrett gets rammed through is the frustration of those who think the response must happen. If Biden came out point blank and said that if a lame duck GOP Senate were to unbalance the court for partisan gain, then he would be forced to respond, it might actually help his favorability.

          1. macroduck

            “I’ll answer before election day” means Biden will let as many people vote as possible before answering, but answer before the “official” election day to preserve the impression of transparency. Remember all those politicians who claimed they were personally opposed to abortion but would not legislate against it? Kinda like that. Alienate as few voters as possible when the votes you need may be split on the issue.

        2. Barkley Rosser


          I recognize that now you are enjoying a Pinot Noir, so I should not give you too hard a time. But I shall make one point.

          For a long time you have repeatedly repeated a regular Fox News line that Joe Biden is “demented,” a term you have applied to various others. Based on his town hall last night, Biden is not remotely that, although he has had a stutter from youth that continues off and on and has allowed Fox News to cook up a video of selected moments out of context that when strung together make him look pretty bumblingly inarticulate, if not outright demented as they claim and you have long claimed.

          Now I think maybe you are sort of backing off that, and I recognize that you have noted that KH did at least OK in her debate with MP. But I must say that Biden really delivered in this town hall, going on long after it officially ended, putting out details and numbers on many policies, apparently without notes, no substantial flubs.

          He may be kind of a boring Dem Gerald Ford, but he is not remotely demented. Might be nice, Moses, if you would admit that you were wrong about that, please. Really, at this point your credibility is on the line here. Everybody saw his performance, and you need to admit how wrong you have been.

    3. pgl

      “Should we interpret forecasts like these as unconditional forecasts without regard to who wins the election?”

      It does but remember in Rick Stryker’s world it is the job of the forecaster to know who wins the election and to also know what policies get enacted.

  2. macroduck

    What stands out to me is that the WSJ mean does not assume that more rapid growth in the near term comes at the cost of slower growth later. The pre-Covid peak is recovered by the end of next year. That seems optimistic with regard to the pandemic. Does the WSJ also have a jobs or jobless rate forecast?

    Perhaps worth noting when thinking about a 2021 economic package – credit programs seem to have limited traction. The PPP loan program had about $138 billion left to lend when it ended in August. The Fed’s loan program for mid-sized businesses has been a flop. Most of the businesses which have closed during the pandemic have been small (naturally) and other than PPP loan forgiveness, there doesn’t seem to be much out there for small businesses.

    Which brings us back to payments to households. They worked, supporting consumption and allowing rent payment. Income support for households seems a better conduit for maintaining small firms’ solvency than loan programs. If next year’s Congress wants to pass an economic support package, the juice is mostly in transfers to households.

    1. Willie

      Don’t forget that the WSJ and by extension, Wall Street, is in the business of selling financial “products.” Their sales are predicated on a growing economy and a rising market. Academics don’t have that same influence upon their judgment.

      1. macroduck

        Absolutely. The thing I don’t understand is why the financial products which require growth to sell well get to wag the dog. I suppose it is investment banking and equity sales together which account for this pattern.

  3. Moses Herzog


    Hope anyone going through California fires or loss of a relative can get over whatever they’re going through. When I was teaching “my native language” (A special skill, hahahaha) in northeast China I always told my students if they could get through their teen years (I was teaching Chinese students, and you have to consider the emotional maturity level is about 4 year behind American student, that’s not an insult, they are very intelligent but the emotional maturity lags roughly 4 years), if they could get past those teen years things get and seem so much better after that. They just have to hold on past that dark point where they aren’t old enough to see things clearly or in a big picture way

    1. pgl

      As I understand it the governor of California asked for FEMA assistance and the Jerk in Chief said no. Is that even legal? California should sue.

      1. macroduck

        Covid Donald has relented. California will get some FEMA cash. Or at least now has a promise of cash which will maybe be revoked after November 3.

  4. ltr


    October 16, 2020

    America’s Money Men Could Save Us. But They’re Stuck in the Seventies.
    (And, unfortunately, yes, they mostly are men).
    By Claudia Sahm

    Let’s face reality: It is likely that no further economic relief is coming from Congress before the election. For months, negotiations between Democrats and Republicans over a follow-up package have alternated between stopping, starting and stalling.

    Congress and the White House became mired in partisan politics as soon as a tenuous recovery from the worst of the pandemic began. Congress started strong this March, passing the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. The measures taken, though imperfect, worked. But we are now the victims of that success, as Congress has lost the will to do more. The outcome is as predictable as it is tragic: as soon as the crisis stabilized enough for partisan inaction to not be political suicide, legislative paralysis returned.

    In the meantime, coronavirus deaths continue to mount and normalcy remains elusive. It was far too soon to end relief but Congress did it anyway. Temporary job losses have become permanent. Through no fault of their own, businesses have closed their doors forever. Communities have laid off even more teachers.

    That leaves the Federal Reserve — gatekeeper of the world’s reserve currency, America’s central bank and lender of last resort — as the only game left in town. And its game is not good enough.

    As with Congress, the Fed acted boldly in March. Financial markets were seizing up and stock prices plunged. The Fed stepped in and pumped trillions of dollars into credit markets to put them back in sync. They offered to lend vast sums to financial institutions and corporations temporarily short on cash. However, shortly after, the Fed fell prey to politics and, perhaps most crucially, to its own longstanding technocratic obsessions and misconceptions.

    The first signs of the Fed walking away from this crisis began with its two failed lending facilities: one meant for middle-sized businesses and the other meant for municipalities with gaping budget shortfalls. As I wrote * in April, these new programs were a watershed; the Fed was poised to support Main Street, for once, not only Wall Street. Even so, these two innovative facilities, authorized in the CARES Act, were rolled out too slowly and months later have made only a handful of loans, largely because the terms of the loans are needlessly onerous.

    Why is politics to blame? Both Democrats and Republicans took aim at the facilities. Democrats chastised the Fed for making midsize oil companies eligible, and Republicans scoffed at the idea of a “blue state bailout.” In turn, the Fed decided to essentially do nothing.

    * https://www.nytimes.com/2020/04/23/opinion/coronavirus-federal-reserve-cities.html

    1. Macroduck

      What Sahm leaves out with regard to the Fed’s medium-sized business lending program is that banks felt pressure from Treasury to lend only to firms that were at little risk of default, at a time when default risk was hard to assess. Banks notoriously lend only to those who don’t need it. The whole point of government intervention is to encourage banks to lend when they otherwise would not. The Fed wasn’t helpful but Treasury actively discouraged lending by banks.

  5. ltr


    April 23, 2020

    The Money Machine That Can Save Cities
    As Congress fumbles, the Fed’s unlimited ability to create money may be the only lifeline that communities have left.
    By Claudia Sahm

    State and local budgets across the United States are beginning to buckle under the economic strain caused by Covid-19. Because the economy is essentially in a medically induced coma, sales tax revenue and revenue from other business taxes have dried up. That means the funds to take care of communities — to pay teachers, to support Medicaid, to hire emergency medical workers, to maintain roads, to build low-income housing — are also drying up.

    Because 40 out of 50 states have laws mandating that both the state’s overall budget and the budgets of nearly all cities be balanced, state governments are already laying off employees and cutting services. More than 14,000 workers in state governments lost their jobs in March. Terrifyingly, those losses, counted by the Bureau of Labor Statistics, only stretch through mid-March, before the shutdowns were nationwide.

    Local officials were blindsided by this crisis and the costs it required to rapidly ramp up medical care and the social safety net. But so far Congress has allocated only $150 billion for state and local governments from the trillions of dollars it approved for pandemic relief. It’s too little and often it’s arriving too late.

    The Federal Reserve knows this….

    1. not_really

      Honestly, the Fed seems to be “all in” on maintain some kind of securities price inflation. Lots and lots of grumbling out there about the amount of debt the Fed is purchasing. Businesses that are supposed to fall off the “leverage cliff” when interest rates increase have their day of reckoning delayed, and the leverage continues.

      If WSJ interviews the recipients of the Fed’s largess, then, of course things look ***FANTASTIC***

      1. The Rage

        Yeah, but it’s not maintaining price inflation, but not letting debt contract. A run on the dollar and poof goes the US. The Fed simply has no confidence in capitalism anymore.

  6. pgl

    Trump was sort of bonkers last night but this will assuredly send him over the edge:


    Pfizer will not seek an emergency authorization for its coronavirus vaccine until after the election, the final blow to President Donald Trump’s repeated pledges to make a shot available before Americans cast votes amid the worst pandemic in a century.

    Pfizer CEO Albert Bourla said Friday that the company may know whether its vaccine is effective by the end of October, but won’t have the safety data the FDA wants at least until the end of November. Amid rising concerns about political pressure on the agency, the FDA released guidance on emergency authorizations that requires vaccine developers to provide two months of safety data on half of the trial participants following the final dose of the vaccine.

    1. Alan Goldhammer

      I was quite confident that we would not see a vaccine before the election. FDA wants to see all the safety data and there was no way that Pfizer could have done this as a fair amount of those in their trial had not had the 2nd vaccination as of early October. They would have had to spend time with the data analysis as well and FDA would need time to sort through everything. What was curious to me from the get go is that Pfizer did not sign up for Operation Warp Speed funding and of the major players went their own path. What I want to know is which of the vaccines is best for old folks like me. There is a paper in The Lancet today on the second Chinese whole inactivated viral vaccine. This is an old technology but may have advantages over the genetic vaccines such as Pfizer, Moderna, J&J, and AstraZeneca/Oxford. The Chinese have some very good data on the over 60 age group. It would be the height of irony if this particular vaccine turns out to be the best of the lot.

  7. ltr


    October 15, 2020

    How the G.O.P. Can Still Wreck America
    Even if Trump loses, his party can do immense damage.
    By Paul Krugman

    After 2016, nobody will or should take anything for granted, but at this point Joe Biden is strongly favored to beat Donald Trump, quite possibly by a landslide. However, Trump’s party may still be in a position to inflict enormous damage on America and the world over the next few years.

    For one thing, while Democrats are also favored to take control of the Senate, the odds aren’t nearly as high as they are in the presidential race. Why? Because the Senate, which gives the average voter in Wyoming 70 times as much weight as the average voter in California, is a deeply unrepresentative body.

    And it looks as if a president who is probably about to become a lame duck — and who lost the popular vote even in 2016 — together with a Senate that represents a minority of the American people are about to install a right-wing supermajority on the Supreme Court.

    If you want a preview of how badly this can go, look at what’s happening in Wisconsin.

    In 2018, Wisconsin voters elected a Democratic governor. A strong majority — 53 percent — also voted for Democratic legislators. But given the way the state’s districts are drawn, Democrats ended up with only 36 out of 99 seats in the State Assembly. And Wisconsin’s elected judiciary is also dominated by Republicans.

    You probably won’t be surprised to hear that the Wisconsin G.O.P. has tried to use its remaining power to undermine Gov. Tony Evers. What you may not know is that this power grab is now turning lethal….

    1. macroduck

      True, but there may be good news coming. Redistricting happens next year and Wisconsin has a Democratic governor. In fact, there are now 24 Democratic governors, meaning fewer “trifecta” Republican states than in the prior two redistrictings. A lot of gerrymandering may be undone next year. Which is why Republicans have been so blatant about voter suppression ahead of this election.

  8. joseph

    The Trump campaign is complaining that the biased moderator was asking unfair and difficult questions in the Trump townhall meeting. Here is the list of questions asked:

    When did you get sick
    Should you wear a mask
    Do you believe in herd immunity
    Why share a Bin Laden conspiracy
    Do you denounce QAnon
    Will you accept losing

    A ten-year-old could answer these questions, but not Trump. The man is suffering dementia.

    1. Alan Goldhammer

      “A ten-year-old could answer these questions, but not Trump. The man is suffering dementia.”
      It is entirely possible that he is suffering from some post COVID-19 side effects both from the meds he was on and the virus. His comments seem more unhinged than I usually see.

  9. ltr

    October 15, 2020



    Cases   ( 8,216,315)
    Deaths   ( 222,717)


    Cases   ( 7,365,435)
    Deaths   ( 112,144)


    Cases   ( 829,396)
    Deaths   ( 84,898)


    Cases   ( 809,684)
    Deaths   ( 33,125)


    Cases   ( 673,622)
    Deaths   ( 43,293)


    Cases   ( 348,816)
    Deaths   ( 9,810)


    Cases   ( 191,732)
    Deaths   ( 9,699)


    Cases   ( 85,622)
    Deaths   ( 4,634)

  10. ltr

    October 15, 2020

    Coronavirus   (Deaths per million)

    US   ( 672)
    Mexico   ( 659)
    UK   ( 637)
    France   ( 507)

    Canada   ( 256)
    Germany   ( 117)
    India   ( 81)
    China   ( 3)

    Notice the ratios of deaths to coronavirus cases are 10.2%, 6.4% and 4.1% for Mexico, the United Kingdom and France respectively.

  11. ltr


    October 16, 2020

    Chinese mainland reports 24 new COVID-19 cases

    The Chinese mainland on Thursday registered 24 new COVID-19 cases, all from overseas, the National Health Commission announced on Friday.

    No deaths related to the disease were reported Thursday, and 11 COVID-19 patients were discharged from hospitals, the commission said. A total of 376 asymptomatic patients remain under medical observation.

    The COVID-19 tally on the Chinese mainland stands at 85,646, with 4,634 fatalities.

    Chinese mainland new imported cases


    Chinese mainland new asymptomatic cases


    [ There has been no coronavirus death on the Chinese mainland since May 17.  Since June began there have been 3 limited community clusters of infections, in Beijing, Urumqi and Dalian, each of which was contained with mass testing, contact tracing and quarantine, with each outbreak ending in a few weeks.

    Currently there is a limited community cluster in Qingdao, with mass testing, contact tracing and quarantine again being used to identify the origin, contain and end the outbreak.

    Imported coronavirus cases are caught at entry points with required testing and immediate quarantine.  Asymptomatic cases are all quarantined.  The flow of imported cases to China is low, but has been persistent.

    There are now 253 active coronavirus cases in all on the Chinese mainland, 4 of which cases are classed as serious or critical. ]

  12. pgl

    Trump is lying to seniors in Florida saying Europe has more deaths from this virus than we do. Something about how their deaths are up by 400% and ours are down by over 30%. Let’s see if one lowers deaths from 1500 a day to 1000 a day and Europe see deaths go up from 50 a day to 200 a day, his percentages may be right but come on. Does he really think the audience is this damn stupid?

    1. Willie

      He is a master of wishful thinking and doesn’t have any concept of the future or consequences. He doesn’t think about how dumb his audience may or may not be. He spouts what he wants to hear and what makes him feel successful and validated.

    2. macroduck

      There are those who will fall for it and those who won’t. Trump has built a career on the former group.

  13. oee

    I trust Left Leaning academics over Wall Street . this is the same crowd who indicated there was no house bubble. (Larry Kudlow). there was no recession that started in December 2007. the financial houses collapsed. Bear Stearns, Merryl Lynch, Citibank, and others. Also, they claimed that BHO’s economic policies would create inflation which did not.

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