The economy is showing more signs of life as the end of Q2 approaches. The Chicago Fed National Activity Index has crossed sharply into growth territory, beating expectations by a more than 12 point gap, and manufacturing activity is following a similar trajectory. Meanwhile, new home sales may have surged 16.6% in May, but existing home sales have plummeted nearly 27% year-over-year and inventories of existing homes for sale are hovering at multi-year lows. Competition among apartment-dwellers turned house-hunters looks poised to remain stiff as the pandemic wears on. And the S&P 500® Index again owes the bulk of its performance to just five companies (we’re sure the names won’t surprise you) as 495 of the 500 are still struggling at a weighted average of -8%. The Nasdaq though has been leaving the other major indices in its dust. The index just hit another record high and the gap between it and the S&P and Dow is the largest it’s been since 1983. But could a declining USD be enough to undermine its success? Turning to the international stage, the European recovery looks to still be going strong, but despite its success in managing COVID-19, Japan is struggling. Will the island nation be further battered by COVID-induced disruptions to the supply chain?
1. More good news from the Chicago Fed…
Source: WSJ Daily Shot, from 6/23/20
2. U.S. manufacturing enjoyed a solid rebound and is just a hair below expansion mode (greater than 50)!
Source: WSJ Daily Shot, from 6/24/20
3. The regional Fed surveys continue to show recovery….
Source: WSJ Daily Shot, from 6/23/20
4. Sales are down partly due to supply of homes being down…
Source: WSJ Daily Shot, from 6/23/20
5. Despite increased demand to move out of large apartment buildings, many homeowners don’t want the public in their homes during a pandemic…
Source: WSJ Daily Shot, from 6/23/20
6. Within the S&P 500, 5 stocks are up 23% while the remaining ~495 are down 8%.
Source: WSJ Daily Shot, from 6/24/20
7. The tech-heavy NASDAQ has outperformed the S&P 500 by 20% over the past year…
Source: WSJ Daily Shot, from 6/24/20
8. It is hard to see what might derail the tech juggernaut. Might it be a declining USD?
Source: WSJ Daily Shot, from 6/23/20
9. Does the emperor have any clothes? The Fed now owns almost 40% of all U.S. Treasury bonds with maturities of 10-30 years…
Source: WSJ Daily Shot, from 6/23/20
10. Europe also enjoyed a significant economic recovery:
Source: WSJ Daily Shot, from 6/23/20
11. However, Japan, which so far has largely avoided Covid, is still reeling…
Source: WSJ Daily Shot, from 6/23/20
12. Covid is not just infecting our seniors…
Source: WSJ Daily Shot, from 6/24/20