Category: Coronavirus (Page 2 of 5)

WCM Chart of the Week for November 23, 2020

November 23, 2020 / Doug Wilde

Trade flow in Asia is maintaining momentum after rebounding from the pandemic-caused low in February. Container traffic in Singapore has recently reached an all-time high level which many see as a proxy for trade in the region (or even the world) given its unique geographical location and distribution capacity. Improving economic trends in the region are also reflected in stock prices. The MSCI Asia Pacific Index, which includes both developed and emerging equity markets, is leading global equities. The total return of the index is up 13.4% compared to the 9.5% return for FTSE All Cap Global Index so far this year through November 20, 2020. We view this as potentially a good omen for global equities because it may signal that the equity rally is broadening beyond the US. [data courtesy Maritime & Port Authority of Singapore, MSCI; chart courtesy Bloomberg LP © 2020]

WCM Chart of the Week for November 16, 2020

November 16, 2020 / Doug Wilde

With US stock market indices across the capitalization spectrum at or above all-time highs, US Treasury yields have been grinding higher. Since early August, the yield on the benchmark 10-year Treasury has risen from an all-time low of 0.51% to 0.9%, forcing long-term US Treasury prices down over 7% since then according to the Bloomberg Barclays Long Term US Treasury Price Index. US stock prices have been rallying due to the announcements of highly effective COVID-19 vaccine trials, building economic momentum, clarity developing in the US political landscape and resilient as well as improving corporate fundamentals. We expect US interest rates will continue to normalize to pre-pandemic levels in coming quarters and that will likely keep downward price pressure on long term Treasuries. We expect this to be gradual given that comparable sovereign rates in Europe and Asia remain much lower or even negative. Overall conditions should be supportive for equities heading into 2021 even in the face of higher US Treasury yields. [chart courtesy Bloomberg LP © 2020]

WCM Chart of the Week for October 26, 2020

October 26, 2020 / Doug Wilde

Over the past decade or more, Europe has endured several painful crises spanning Euro-related stresses to the recent Brexit uncertainty. The common thread retarding recoveries from these epochal events has been the lack of coordinated policy response, in particular fiscal stimulus. The European Union, now with the UK removed, simply does not have the strength to influence its member states to expand fiscal spending that would benefit the region beyond each country’s own national borders. Now the global Coronavirus pandemic is accelerating to frightening levels across Europe as evidenced by case momentum. The imprint on European stock prices is telling. From the onset of the pandemic, the broad-based EuroStoxx 600 is over 8% lower in US dollar terms and has been range trading since early June. By contrast, The S&P 500 is flirting with all-time highs. We believe the difference is that, while Europe has generally been more aggressive in the public health response to the pandemic, the overwhelming US fiscal and monetary response carries the day as compared to the apparent EU policy vacuum.

WCM Chart of the Week for September 21, 2020

September 22, 2020 / Doug Wilde

This week’s chart appeared in the Wall Street Journal via Germany’s Kiel Institute for the World Economy and shows the rapid rebound in global trade after the pandemic-induced economic stall. As the Journal points out, World trade volume has regained half of the volume lost since the COVID-19 outbreak in three months whereas it took nearly 12 months for world trade to regain a similar drop in volume in the aftermath of the global financial crisis. While the rebound is not consistent across the globe, it is an encouraging sign that commerce is returning to normal.

What we find notable is the speed of the recovery in trade volume and consistency with our comments last week regarding the fast pace of US jobs re-creation. The causal nature of this recession was highly unusual, near universal global government-led economic lock-down, so it is not all that surprising that the recovery could be quicker than normal. Several factors could disrupt the recovery including a potential second wave of viral infections, lack of an effective vaccine or therapeutics, and ongoing trade tensions. But, improving macroeconomic trends are welcomed worldwide.

WCM Chart of the Week for September 11, 2020

September 11, 2020 / Doug Wilde

August’s labor market statistics were encouraging and suggest that the US economic recovery is far from normal. According to the BLS, Nonfarm Payrolls expanded 1.37 million in August, slightly above expectations, and the unemployment rate dropped by more than expected to 8.4% versus consensus expectations of 9.8%. While the number of unemployed dropped by 2.8 million, there are still 13.6 million Americans out of a job, which is 7.8 million more than in February. The nature of the recession, which appears to be largely behind us, is like none ever experienced because it was government induced nearly worldwide. Governments across the globe intentionally suppressed economic activity rather than act in their normal supportive role. Recessions are often caused by structural imbalances such as excess leverage in the financial sector, over-accommodative monetary policy causing hyper-extended stock market valuations, overvalued currencies and commodity price shocks. These types of imbalances did not exist in the US for the most part prior to the pandemic and that may have set the conditions for a faster recovery. One dramatic example — over 10 million jobs have been recovered since April. By comparison, it took 54 months, from October 2010 to March 2015, for an equivalent number of jobs to be recreated in the aftermath of the Financial Crisis. [data from the US Bureau of Labor Statistics]

WCM Chart of the Week for August 28, 2020

August 31, 2020 / Doug Wilde

The US stock market continues to rebound from the pandemic panic-driven lows, with the NASDAQ and S&P 500 continuing to post new all-time highs over the past several weeks. This is prompting investors to question if the current rally can last, or even if it marks the beginning of a new bull market. There are risks that could derail the stock market’s advance ranging from tensions with China, resurging virus hot spots, social upheaval around the country, and the upcoming national elections. The US labor market is also a persistent drag and will not likely have recovered until well into 2021.

There are several factors that are supportive of asset prices including unprecedented fiscal and monetary support, and mounting positive momentum in key economic sectors such as manufacturing, housing and the consumer. As previously mentioned in our COTWs, in the US personal savings rates remain elevated and personal balance sheets have been de-levered, suggesting the consumer has the ability to spend if they wish. This week’s chart highlights total assets in money market funds, which remain near peak levels suggesting private investors have been underexposed to equities during the stock market’s historic recovery rally. This is a condition many cite as additional evidence that equities could continue to advance higher in the months ahead. [chart courtesy Bloomberg LP © 2020]

WCM Chart of the Week for August 21, 2020

August 23, 2020 / Doug Wilde

A few weeks ago we discussed US consumer trends, citing the elevated personal savings rate as reported by the BEA, in addition to citing expanding personal consumption. The relatively high personal savings rate suggests that there could be pent-up consumer demand to put that money to work. This week’s chart highlights total consumer credit outstanding, which has declined considerably since its pre-pandemic peak at the end of February. The decline in personal balance sheet leverage suggests that American households can access credit as needed or desired. This data is not very timely as June 30 is the most recent report, but it does suggest that the consumer is not as distressed as in previous recoveries.

The labor market continues to be the most restraining issue facing the economy — 14.8 million continuing jobless claims with initial claims amounting to 1.1 million this past week. But, the Bureau of Labor Statistics reported July payroll jobs expanded in 40 states, declined in one and were essentially flat in the remaining nine. We do need a broader and more inclusive jobs recovery because, as the BLS reports, the large increase in average hourly earnings is not good news — It reflects lower-paid workers being pushed out of the work force due to COVID-19 related business suspensions and closures. Strengthening trends in housing and manufacturing should spur further job growth and help restore this disenfranchised segment of the workforce. [Chart courtesy US Federal Reserve, Bloomberg LP (c) 2020]

WCM Chart of the Week for August 17, 2020

August 18, 2020 / Doug Wilde

Over the last several months we have cited several factors that, in our view, explain why the US stock market indices have been rising and may continue to do so. The most significant contributors are measures being undertaken by the US Federal Reserve and Federal government to support the labor market. The US consumer has been responding by increasing consumption, and so we see core components of the US economy like auto purchases and manufacturing rebounding. The official unemployment rate is still terribly high, measuring 10.2% in July, but that is a significant improvement over 11.1% in June.

Pandemic-related government-mandated lockdowns are being lifted (although in some areas of the country those being reinstituted) and economic trends should continue to improve as people return to work and to consumption. Critically, there are encouraging signs related to COVID-19. According to the National Center for Health Statistics (part of the CDC), weekly total provisional deaths as of August 8^th registered 438, lower than the pre-surge figure registered on March 21^st. These totals are significantly lower than figures cited by media outlets and Johns Hopkins University, a consequence of how deaths are verified and reported, but most importantly we are seeing improving trends regardless of methodology, and that is a relief. Very well known yet still necessary to point out, this week’s chart demonstrates the concentration of fatalities for those age 55 and older, showing the terrible risk to and impact on the elderly. But, by contrast, the low concentration and declining trend among the young may alleviate concerns about the upcoming school year and broadening re-openings across the country.

WCM Chart of the Week for July 31, 2020

July 31, 2020 / Doug Wilde

Over the past few weeks, corporate earnings across the globe have been showing signs of recovery. Citigroup’s Global Earnings Revision Index has been climbing for three weeks in a row, encouraging given the economic challenges facing the world. While this trend is positive, its path will be unpredictable due to COVID-19 related shut down and re-openings in several key economies. The recovery in corporate earnings, if it persists, could alleviate the tragic stress in labor markets and help reinvigorate economic activity heading into 2021. Fiscal support is building momentum with the European Union’s 750 billion Euro stimulus plan (discussed last week) and the anticipated fourth phase of US stimulus. It does remain to be seen if the enormous amount of spending, both fiscal and monetary, will have a lasting impact.

WCM Chart of the Week for July 20, 2020

July 20, 2020 / Doug Wilde

On Thursday, July 16^th, the US Census Bureau released Retail Sales figures and month-over-month growth registered a nice surprise — 7.5%, well above the consensus estimate of 5.5%. The prior month’s figures were also revised upward. We see this as an obvious reflection of the reopening of the US economy and pent up demand. But, we don’t read much into the positive monthly gain versus the consensus estimate because economists have never had to forecast under conditions that can be considered “lock-down uncertainty”. What we do find encouraging and more interesting is that the reported annual growth rate was 1.1%. At this time last year the US economy was on firm footing, and yet Retail Sales are modestly above those levels today. While the trajectory of sales growth is a relief, we would not be surprised to see some sluggishness emerge as we collectively digest the flurry of initial purchasing pre-quarantine and new virus spikes elicit further lockdown measures. [chart courtesy US Census Bureau, Bloomberg LP (c) 2020]