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The market signals over the next months should provide guidance on where investors think the economic recovery is heading.

We have been tracking the pace of the recovery through economic data to help determine if or when the decline in 2020 will be recaptured (here and here). This week, we are going to look at some market indicators to watch that could help determine if the recent recovery in economic data is likely to...
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The S&P 500, NASDAQ 100, and NASDAQ Composite are reaching new highs, but is “the market going up”?

As we mentioned in a prior post, the S&P 500 index has developed into the way most investors view and discuss the U.S. equity market, and the index has become very concentrated into a small number of stocks.  The NASDAQ 100 reached a new high on June 5th, the NASDAQ Composite reached a new high...
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An executive order was implemented to address the lapse in benefits, but it may not be enough.

One of the policies put in place to combat the rise in unemployment because of the lockdown measures used to limit the spread of COVID-19 was the Federal Pandemic Unemployment Compensation program.  This program added $600 a week to unemployment provided by each state.  The original program expired at the end of July.  Congress was...
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Interest rates are at record low levels, but that only helps the borrowers who can access the market.

The Federal Reserve Board lowered the target range for the Federal Funds Rate to 0%-0.25% earlier this year.  One of the goals of this policy move and other initiatives was “to support the flow of credit to U.S. consumers and businesses.”  By reducing the cost of borrowing (through lower interest rates) and buying public securities...
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Will the current fiscal and monetary policy initiatives cause inflation?

In April, we wrote a blog post discussing what has historically caused inflation to increase and how to monitor whether the current or proposed fiscal and monetary policies would lead to higher inflation.  The July Consumer Price Index (CPI) report showed that inflation has been increasing steadily since we last wrote about the topic, so...
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How is the labor market doing post bottom?

The May payroll report provided the first indication of the labor market starting to recover from the losses in March and April.  In our post at the time, we laid out some ways to track the progress of the labor market.  This week, we are updating how those data points have been trending and what...
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Are analysts setting expectations too high?

Earnings estimates can be a useful proxy for corporate profits which investors use as a gauge for expected returns and valuation analysis.  Current estimates for 2021 anticipate the S&P 500 earnings per share to recover all the lost ground from 2020 and getting back above the record high set in 2019.  Based on the current...
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When does the equity market no longer represent the full economy?

Many investors and economists often refer to the stock market as a leading indicator for the economy, as equity market participants should be discounting the impact of future positive and negative events into the current price of stocks.  Those same investors and economists are often referring to the S&P 500 when they refer to the...
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Economic data points have rebounded from the bottom, but can they sustain that momentum?

As states removed mobility restrictions in May and June, economic data points improved from weak levels.  This has included consumer and business sentiment indicators, payroll data, consumer spending, and to a lesser extent production data.  Much of these gains have been driven by the return of workers to businesses that were temporarily closed or required...
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Is the rebound in Q3 GDP growth the end of the recession?

We, and many others, have been reporting that GDP growth in the second quarter could likely decline at a record analyzed pace estimated to be between 30-40%.  The consensus estimates are that GDP growth will accelerate at a 20% annualized rate in Q3. ­­­ Source: Bloomberg. There are some arguments being made that a positive...
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