Explosive Rebound Hits Wall of Uncertainty - July 23, 2020

Reopened businesses and government spending via stimulus payments and generous jobless benefits have fueled record gains in employment and consumer spending in May and June.

The Chicago Fed National Activity Index, which is a broad-based economic indicator that consists of 85 monthly economic reports, rose at a record pace in May and June (data back to 1967).

  • The economy is still climbing out of a deep pit, and many are suffering from economic hardship, but the early stages of the recovery have been strong.

A peek ahead

Covid cases have spiked in June and July, and daily economic data have turned mixed.

  • Growth in restaurant bookings has stalled (OpenTable).
  • Requests for directions have stalled (Apple Maps).
  • Air travel through TSA checkpoints has leveled off (TSA).
  • Improvement in hotel occupancy rates has slowed (Hotel News/STR).
  • Mid-July consumer sentiment declined (U Michigan survey).

High-frequency data are not currently signaling a contraction. Instead, the data are signaling a pause in the recovery.

Investor’s corner

Current strength in the stock market suggests the economy won’t experience a renewed downturn in activity, but the outlook is far from certain.

In today’s environment, investors that have a highly diversified approach cannot eliminate day-to-day volatility but are in the best position to manage volatility and reach their long-term financial goals.