Cabin fever is a reality. And you don’t have to live in a cabin to get it.
With everyone chomping at the bit to get back to ‘normal’, I thought it would be helpful to check the five metrics that I previously identified as signals for the start of the economic recovery phase that I called AB, or America is Back.
1. Flattened curve
Status: Close, but stay vigilant
Above all, for the economy to get back on track, we needed to slow down and then reverse the increase in infection cases per day, nationwide. It is only when the spread of the virus is contained that we can safely return to work and regain some semblance of normalcy.
According to my virus reversal thesis, “It is from this data that I based my virus reversal thesis, which is that by May 18 or earlier, we will see a flattening of the new infection curve, and here on September 1, we will be at a much higher capacity to fight this virus.
While it is true that we have managed to flatten the curve nationally and testing is more available, there are still places where the number is not doing very well.
I don’t feel confident that the spread of this disease is behind us so I can’t give that indicator and everything is clear for now.
If we have truly contained the spread of the virus, we will not get a noticeable rebound in cases when we start to move forward in the stages of reopening the economy.
It depends on us. A second wave is likely but not inevitable. If we continue to wear masks where appropriate, religiously wash our hands, and remain vigilant for possible contamination, by September 1, we will be in a better position to handle all that fall and winter. reserve us.
2. End of stay-at-home orders
Status: On our way
The second indicator of economic recovery is the end of home orders and the reopening of business enterprises.
We are in the very early stages of this process, but it has started at some level across the country. Over the last Memorial Day weekend, we saw a lot of Americans doing normal weekend activities. Some with masks and others without. Remember friends, winter is coming.
3. The 10-year yield exceeds 1%
Status: Not yet
Before the 10-year rate fell below 1% this year, I said that in a recession, the 10-year rate could be expected to be between -0.21% and 0 , 62%.
On March 9, the 10-year fell to 0.34%, but for the most part since the start of the COVID recession, the 10-year has been above 0.62%. Given massive job losses and other dismal economic data, this return may seem high.
But it does make sense if you assume that the bond market anticipates the economic data for the third and fourth quarters will be better. A rebound in infections, the reinstatement of stay-at-home orders and / or the removal of fiscal or monetary support are all things that could lower yields.
On the other hand, if the economic data improves – such as a decrease in jobless claims – yields will rise, signaling the return of real economic growth. We are not there yet. When we enter a range between 1.33% and 1.6% on the 10-year rate, we can consider this upward trend.
4. Decrease in credit stress and unemployment claims
Status: 1 out of 2
The St. Louis Financial Stress Index, which measures the degree of financial stress in US financial markets, climbed aggressively to 5.379% on March 20. From the summit, the index has taken a spectacular plunge. (See graphic below).
A level below 1.21% would indicate some calm in the markets, but the ultimate goal would be to see the index go down and stay below zero, indicating stable market conditions common to the growth of the economy. Currently, it is at 0.6166%
It is important to remember that the St. Louis Index is an index of financial markets and not an index of the overall economy. Employment may be a better measure of this.
And it doesn’t look good.
As the growth rate of jobless claims has plummeted over the past week, the cumulative job losses are tragically high, with more than 38.6 million Americans filing for unemployment in a short period of time. . Providing tax support by increasing unemployment benefits and providing loans to Americans prevented a deep deflationary event and, as such, was one of the most successful economic policies I have seen implemented in my life.
5. The data of the most affected sectors begins to increase
The fifth metric I’m looking at to determine where we are on the road to recovery is movement in hardest hit sectors like food and beverage, accommodation and travel.
Since the growth of these sectors comes from the lowest levels, they are a sensitive measure of growth. Car sales, kilometers driven, bar frequentation, domestic flights, restaurant meals and hotel accommodations are all rebounding and starting to increase.
For the housing market, purchase requisitions have been one of the most affected segments and therefore constitute a sensitive metric to watch for a potential recovery.
From the peak growth rate of requisitions to the lowest year-over-year decline, we saw a 52% decline in 2020. Year-over-year, requisitions fell as much as 35% in weekly reports. Since that nadir, requisitions have shown increasingly small declines year over year, with the latest report showing only a 1.5% drop from the same period of the year. last year. We might even see the positive first impression year over year this week!
Because housing is such a vital sector to the global economy, I’m more than a little excited about this trend.
Previously I wrote:
“I think the months of April and May are going to tell an epic story of America’s start to defeat this virus. If we do this correctly and document the cause and effect of our efforts, future generations can look to this time for guidance on how to deal with a global pandemic. My faith in America’s victory has never let me down because I still believe in my people and my country. I can tell you now, this virus doesn’t change my perspective on it. “
This is my story, folks, and I stick to it. Let us remember that this virus has killed over 98,000 Americans, and it is up to us to decide how many more this monster will claim. So, please be careful and careful there.
Stay alert and be kind to each other. We’ve all been there.