Thread by @Darky999

It is a 'V' bro?

(for US economic recovery)

Quick thread looking at some real time data

Bottom line = no, it's not (sorry, but it's not)

@TetotRemi @RaoulGMI @DiMartinoBooth @chigrl @Barton_options

1/N

The ECRI @businesscycle leading indicator for US has stalled out in absolute terms over the last two weeks

Learn more:
businesscycle.com/ecri-reports-i…

2/N

The Real-Time Population Survey suggests that employment growth stalled in latter half of June (remember NFP = mid June cut off, and also doesn't agree with DoL stats either...)

Learn more: sites.google.com/view/covid-rps/

3/N

It's a bit overused, but the OpenTable data shows a slowing in late June, with a small spike for 4th July celebrations (to be expected)

4/N

Slightly older data, but Jefferies has a real-time economic index that also showed a slow down in mid-June, one would expect the updated data to show it to tick down

5/N

Richmond Fed data shows Hours Worked by Hourly Employees starting to trend down at end of June...

Learn more:
richmondfed.org/publications/r…

6/N

Still with Richmond Fed (same link as above tweet)...

Local Businesses Open has also ticked down at end of June

7/N

Weekly Economic Index @NewYorkFed ticked down earlier in the week, but the new data nudged it up, it looks like it's slowing, and recovering much slower than it went down

Also, look at longer tern chart (!), we are a long way from a 'V'

Learn more: newyorkfed.org/research/polic…

8/N

In a debt based fiat economy, recoveries tend to need a bottoming out in C&I lending (see 2009/10 cycle), we just had the 'everyone pull their revolvers' spike, now it's heading quickly downwards in YoY terms (and in absolute terms too)

Learn more: fred.stlouisfed.org/series/TOTCI#0

9/N

Conclusions: These high frequency data (all weekly or even more frequent) suggest that there is a significant wobble in the US recovery, most likely driven by people staying at home with cases increasing again in many parts of the country (so less confident to go out)

10/N

The number of deaths has continued to decrease, but this doesn't really matter for confidence levels regarding going out; if people think there is COVID in their area, they will not go out as much, and if you are older, you are even more likely to stay at home...

11/N

Deaths may also be lagging the new infections like they did in Mar/Apr, but with a younger cohort now becoming infected they may not increase, but the point is that it doesn't matter if confidence to go out is decreased by the increased infection levels...

12/N

For a V shape it's highly unlikely you can have a stalling of these real-time indicators, unless they have an extremely quick reversal back upwards, this could be more like an 'h' (yes, lower case h), an inverted square root, or just the classic 'w'

But it's not a V

13/N

Finally, this doesn't mean equities cannot go up in the short term, the stock market is not related to economic conditions at the moment, even Q2 earnings (that will likely be horrible) will probably do nothing to stocks

Non-V could lead to much more stimulus too

14/N

Ultimately economic gravity should win, that could take a long time, I recommend to keep tracking the high freq data, the monthly data, and to keep a flexible portfolio and don't get wedded to positions - as EVERYONE is making mistakes in this market, so don't sweat it :)

FIN