A V-Shaped Recovery Runs into Uncertainty - July 8, 2020
Over the last two months, the economy has rebounded at a pace that is much better than nearly anyone could have expected.
- Job growth is up at a record pace in May and June per U.S. BLS data.
- Retail sales rose at a record pace in May per U.S. Census data.
- The service sector expanded at a healthy clip in June per the ISM.
It’s an encouraging rebound, but let’s also acknowledge we experienced record declines in April, and layoffs remain at historically high levels.
A robust upturn hits a bump
As we turn the corner on the first half of the year, Covid cases are rising across the country.
- It puts a big question mark on short-term economic prospects.
As some states temporarily backtrack on reopenings, we’re seeing a plateau in some high-frequency data, including restaurant bookings (OpenTable) and foot traffic to businesses (SafeGraph).
- If there is any good news, daily deaths remain in a downward trend.
So far, investors have shrugged off the spike in cases, likely viewing any increase and economic impact as temporary.
But uncertainty is unusually high today and market volatility can’t be ruled out.
In today’s environment, investors that have a highly diversified approach are in the best position to manage day-to-day volatility and reach their long-term financial goals.