Many believe it will take years to fully recover from Covid-19. Indeed, over the weekend, U.S. Federal Reserve chairman Jerome Powell suggested that although the economy will eventually recover, the process could stretch through until at least the end of next year and ultimately depends on the development of a vaccine.Read more
The attempt to re-open parts of the U.S. economy amidst the ongoing Covid-19 crisis is either Red, Blue, or Purple! Using data from an employment tracking tool utilized by 100,000+ local businesses across the United States, the accompanying chart illustrates the speed and depth of the decline in hours worked and its recent slow recovery among traditional Republican, Democratic, and Swing states.Read more
With May Day marches and demonstrations cancelled, the workers of the world have one less opportunity to remind us of the ever-widening wealth gap and the evils of the “Top 1%.” It’s a shame, because this was the year that we active managers would have stood shoulder to shoulder with those protesters voicing our own contempt for the “Top 1%”… of the S&P 500.
Domestic, large capitalization, and growth have dominated stock market leadership for much of the last decade. During this stretch, investors (author included) have repeatedly attempted to exploit “undervalued and out-of-favor” segments of the stock market, only to be proved premature.Read more
Is there any way to judge when U.S. economic reports may finally bottom? Obviously, it depends on what happens with the virus. If it continues to burn hot or simply lingers longer than expected, keeping “stay-at-home” orders in place, could economic data prove bottomless?Read more
For the second time in the last 30 years, “growth” has dominated leadership within the stock market. After significant outperformance during the 1990s’ dot-com era, the growth style has again substantially outpaced since the start of the last recovery (Chart 1).Read more
We view the coronavirus pandemic as the final straw that tipped an already vulnerable U.S. economy into recession, rather than the watershed event that will change the way we view growth, profitability, and even the nature of work itself. But even economic “optimists” like us need to recognize that the recovery back to last cycle’s earnings peak will be a long and grinding one. There’s a good chance that the four-quarter trailing S&P 500 GAAP Earnings Per Share cycle peak of $139.47 will not be exceeded until 2023 or 2024 (Chart 1).Read more
Earnings, like everything in the economy, are in freefall. Finance textbooks would argue this paints a bleak future for the stock market, but that isn't always the case.Read more