Economic Insights

Today we’ll look at the data, including some non-government sources. As you will see, millions of workers will stumble through this period, and they may be the lucky ones.

COVID-19’s path is evident everywhere we look: spending, saving, staffing, sentiment, and sports.

We've updated our monthly workforce analysis to include Thursday's Employment Report for June. The unemployment fell to 11.1%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 4.8M.

In 1976, Grateful Dead released “What a Long Strange Trip It’s Been.” The second quarter felt like a long strange trip, except it took place over just three months. We entered the quarter trying to flatten the curve, did so, and saw the economy reopen and social distancing restrictions relaxed to a degree.

It’s hard to recall a more confusing quarter for investors. While economic data plumbed depression-level depths for most of the past three months, equity markets rallied heavily. This odd juxtaposition led many to opine that markets had disconnected entirely from the economy. We disagree.

High-quality companies outside the U.S. look especially attractive to us. And their stocks have underperformed recently, possibly giving them greater upside potential.

The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present.

The S&P dropped at the end of last week and then started Monday high. The index hovered around a 65 point range the rest of the week. The index is up 0.70% from last Thursday and is down 2.44% YTD.

Note: This commentary has been updated with the latest numbers from Thursday's Employment Report. Consider: Today nearly one in three of the 65-69 cohort and one in five of the 70-74 cohort are in the labor force.

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $15,442 for an annualized real return of 8.72%.

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution).

The journey to a full recovery will be a long one, but at least we’ve taken some initial steps.

For the second month in a row, the Labor Department reported last week that the economy added a record number of new jobs in June, vastly outpacing forecasters’ pre-report estimates. This far better than expected report is leading many economists to refigure their growth forecasts higher for the second half of this year.

This morning's seasonally adjusted 1.314M new claims, down 99K from the previous week's revised figure, was worse than the Investing.com forecast of 1.375M.

"Travel on all roads and streets changed by -25.5% (-72.9 billion vehicle miles) for May 2020 as compared with May 2019. Travel for the month is estimated to be 213.2 billion vehicle miles." The 12-month moving average was down 2.39% month-over-month and down 6.5% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 2.45% month-over-month and down 6.9% year-over-year.

The last couple of years have been remarkable ones for yields. As of June 30, the 10-year note is 12 basis points above its historic closing low of 0.54%, reached on March 9.

The global pandemic may be just what’s required to address the environmental crisis once and for all, says former U.S. Vice President Al Gore.

Although the case for basic income is not yet a slam dunk, pandemic relief benefits add circumstantial evidence in favor.

The COVID-19 pandemic continues to impact economies across the globe as they emerge from lockdowns, including emerging markets.

We believe the risk that preferred-stock dividends will be suspended is low despite the recent announcement by the Federal Reserve that it is requiring banks to cap their common stock dividends.

At present, multiple jobholders account for just 4.3 percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.

A key lesson of 2020 is the importance of staying invested even during times of high volatility. We believe that an appropriately risk-targeted, globally diversified portfolio is as important as ever. Maintaining an optimally risk-controlled portfolio is most desirable.

As we enter credit repair, we are wary of using the global financial crisis as a benchmark for the path to recovery. We see several key reasons that suggest this time will be different.

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns.

Here is a summary of the four market valuation indicators we update on a monthly basis.

• The Crestmont Research P/E Ratio
• The cyclical P/E ratio using the trailing 10-year earnings as the divisor
• The Q Ratio, which is the total price of the market divided by its replacement cost
• The relationship of the S&P Composite price to a regression trendline

June was a mixed month. The national reopening in May and June led to new viral outbreaks and a spike in new infections in multiple states. Surprisingly, though, both the economic recovery and financial markets did very well. As we enter July, the question of many minds is whether the medical situation will improve—and whether the good economic and market news will continue.

The latest monthly employment report showed a gain of 4.8M nonfarm jobs, which consists of a gain of 4.296M service-providing jobs and a gain of 504K goods-producing jobs.

The June job market report and other indicators remained consistent with an unprecedented steep drop in economic activity in March and April, followed by a sharp-but-partial rebound in May and June. Many of these data were collected before the recent surge in COVID-19 cases.

The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.

The market does not care about our opinion regarding what it “should” do. Right now the market does not seem to care that COVID-19 cases and positive test rates are on the rise in the US. What the market cares about now is that economic data has been better than expected...

The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through May, is now available.

The economic calendar is modest, and many market participants will probably extend their long weekends. The ISM Non-Manufacturing Index and jobless claims data will be the most important.

Here is the latest update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month.

What does the ratio of unemployment claims tell us about where we are in the business cycle and our current recession risk?

It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.

Pricing dislocations and adjustments between companies, industries, regions and asset classes due to the impact of COVID-19 offer opportunities for select hedged strategies, according to K2 Advisors.

Quick take: At the end of June the inflation-adjusted S&P 500 index price was 119% above its long-term trend, up from 106% the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into underperformance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

This commentary has been updated to include Thursday morning's release of Nonfarm Employment. June's 4.8M increase in total nonfarm payrolls had revisions that resulted in 90K more jobs than previously reported. The Investing.com consensus was for 3M jobs gained and the unemployment rate to decrease to 12.3%.

The Institute of Supply Management (ISM) has now released the June Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at percent 57.1, up 11.6 from 45.5 last month. Today's number came in above the Investing.com forecast of 50.1 percent.

The June US Services Purchasing Managers' Index conducted by Markit came in at 47.9 percent, up 10.4 from the final May estimate of 37.5. The Investing.com consensus was for 46.7 percent.

The challenges keep mounting for global trade, unemployed workers, and banks.

American ingenuity is something to take pride in this weekend as we (safely) celebrate the Fourth of July.

In response to a standing request, here is an updated comparison of four major secular bear markets. The numbers are through the Tuesday, June 30 close.

The case for considering tactical and long-term allocations to small cap stocks.

This morning's employment report for June showed a 4.8M increase in total nonfarm payrolls, which was above the Investing.com forecast of 3M.

Quick take: Based on the June S&P 500 average of daily closes, the Crestmont P/E is 119% above its arithmetic mean and at the 99th percentile of this fourteen-plus-decade monthly metric.

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Are we in the beginning stages of another secular bear?

We've updated our periodic look at the Philly Fed ADS Index today's release which includes initial jobless claims through June 20 and the Third Estimate for Q1 GDP.

The initial economic rebound seen in recent weeks won’t bring us back to pre-pandemic levels, explains Chief Economist Scott Brown. “A full recovery will take time.”

After a decade of steady growth and rising asset prices, economies and financial markets were rocked by the COVID-19 pandemic. The global health crisis forced most governments to lock down their communities, halting economic activity almost overnight and causing financial markets to reprice lower at an unprecedented speed.

Some 2020 graduates are finding jobs, even in this economy. Luck plays a role, sure, but so does a willingness to compromise.

This morning the Institute for Supply Management published its monthly Manufacturing Report for June. The latest headline Purchasing Managers Index (PMI) was 52.6, an increase of 9.5 from 43.1 the previous month. Today's headline number was above the Investing.com forecast of 49.5 percent.

The June US Manufacturing Purchasing Managers' Index conducted by Markit came in at 49.8, up 10 from the 39.8 final May figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

As if the Coronavirus outbreak wasn’t enough of a problem for society to deal with, shortly afterwards, two American police officers ended the lives of two American civilians. Why that will affect financial markets for a long time to come you can read here.

Today we have the ADP June estimate of 2.369M nonfarm private employment jobs lost, a decrease over the ADP revised May figure of 3.065M.

Investors continue to pile into gold-backed exchange-traded funds, with holdings at a record.

Valid until the market close on July 31, 2020.

The S&P 500 closed June with a monthly gain of 1.84% after a gain of 4.53% in May. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — are signaling "cash".

The Fed chair in his remarks to lawmakers struck an optimistic note on what he is seeing as economic activity resumes.

Economists estimate that 68% of eligible unemployed workers saw their income go up relative to what they were making while employed. For one out of five unemployed workers, the benefits were twice as large as previous earnings.

It started with an offhand comment from a developer I retained for a new website. He asked, “Do you want the website to be ADA compliant?”

Efforts to contain the coronavirus have had a major impact on the global economy. There is still a lot of uncertainty in the outlook, which has three elements. First, there was a sharp decline U.S. Gross Domestic Product in 2Q20. Second, there was a sharp-but-partial rebound off the lows in May. Third, improvement after the initial rebound will slow, barring a vaccine or effective treatment for COVID-19...

Many investors are looking for emerging signs of a return to normalcy from the coronavirus crisis. While there are many indicators to choose from, we’ve assembled a group of signals, with the help of big data, that may point the way.

Markets have rallied on hopes for an economic recovery as coronavirus-imposed lockdowns are eased across the globe. The rebound has been helped by oversold investor sentiment, but with sentiment back to neutral, so too is our strategists’ market outlook.

The headline number of 98.1 was an increase from the final reading of 85.9 for May. Today's number was above the Investing.com consensus of 91.8.

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, rose to 36.6 in June from 32.2 in May, which is in contraction territory. Values above 50.0 indicate expanding manufacturing activity.

With today's release of the April S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.33% month over month which is cut to 0.16% with inflation adjustment.

As we reach the half-way point of what has been an extremely eventful year in asset markets, this week we take a step back and assess the current landscape from a momentum perspective. Where is the momentum and how likely is it to persist?

The price of Regular and Premium are up four cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.14 and Mississippi has the cheapest at $1.81. The WTIC end of day spot price closed at 39.70, a decrease of 2.5% from last week.

Historically low bond yields threaten the diversification value of bonds in the traditional 60/40 allocation.

Incredible as it may sound to nearly all observers – once they learn what MMT says – its basic economic tenets are agreed to by most knowledgeable economists. The dispute is not really over its core economic model; it is over fears of its perceived political implications.

This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for June. The latest general business activity index came in at -6.1, up 43.1 from -49.2 in May. All figures are seasonally adjusted.

Today the National Association of Realtors released the May data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales mounted a record comeback in May, seeing encouraging contract activity after two previous months of declines brought on by the coronavirus pandemic."

If you haven’t heard of Modern Monetary Theory, or “MMT,” you will soon. If you recently lost your job due to the economic shut down, and received a stimulus check, you are already a beneficiary. As we will discuss in Part-1 of this two-part series, MMT’s theory falls flat when faced with reality.

A “perfect storm” of surging government debt levels, plunging real bond yields, rising coronavirus cases and deteriorating economic forecasts pushed the price of gold to an eight-year high this week, and some analysts now project the metal to top its all-time high within the next 12 months.