The Pulse – What’s happening in the Economy and the Capital Markets: 9/14/20 – 9/18/20|
Reading Time: 4 minutes
The economic recovery is still positive, but the pace is slowing. Friday’s Leading Economic Indicators index increased just 1.2%, below expectations and the lowest since April. Industrial and Retail Sales data told a similar story –below expectations and below the prior month’s reading.
The Stock Market – The financial markets were mixed as investors rotated into smaller and more economically cyclical stocks, signaling they see the US recovery maintaining strength past the election.
Economic Data – Jobless claims improved after last week’s bad reading, but still high by historical standards. PUA decreased and Consumer Confidence was up from August.
This Week’s Focus: Transportation – US ports are showing improvements, but gas demand has flatlined.
Top Headlines – The biggest software IPO ever, BP reports on oil demand and Lumber is COVIDs latest victim.
For greater analysis and our perspectives on last week’s economic data read on.
The Market continues to rotate with small caps, industrials and materials doing best which is a vote of confidence for a US economic rebound. International and Emerging markets continue to perform.
This big news this week was the IPO of Snowflake, a cloud data platform company, which valued the company at $70 billion, a huge jump compared to its prior valuation of $12.5 billion earlier this year. Revenue for 2021 is estimated at $1 billion, putting the forward multiple on revenue at 70x.
Private Equity: US middle-market deal value dove 18.5% in 1H, however fundraising remained healthy, and deal volume started to pick up toward the end of the period. (link)
The Economic News
The Weekly Economic Index is showing moderation in the pace of the recovery.
The Leading Economic Indicators point to continued expansion (>0), but at a slower pace
High Frequency Data
The high frequency data – a few highlights:
- Jobless claims (Initial and Continuing) improved after a bad reading last week. The overall levels are still exceedingly high by historical Pandemic Unemployment Assistance (not shown) also decreased.
- With school back in session, the rebound in travel is losing momentum – Hotel and Air travel are down week over week and month over month as business travel remains
Additionally, this week had the release of key economic data related to:
- Consumer Confidence Index was better than expected and up compared to
- Housing starts were below expectations and down vs
- Building permits had similar economic data to housing starts.
- Homebuilders’ Index was better than expected and increases August.
- Industrial Production was weaker than expected and down significantly vs.
- Capacity Utilization was in-line with expectations and better than
Focus of the Week – Transportation
Trends in Transportation can provide insight into the pace of the economy, as inventories and finished goods need to be shipped from manufacturing facilities and distribution centers, and increasingly, eCommerce warehouses.
Activity at US Ports are showing improvements off the May 2020 bottom. As trade with Asia increases, this activity should too.
US Ports Total Container Activity Year over Year
Meanwhile, domestic shipping activity has rebounded strongly off the April bottom to the highest levels this year.
Cass Freight Index – Shipments
Yet the recovery in overall miles driven and gas demand has flatlined after the core of the summer driving months.
Gas Demand – barrels per day
A Few Stories that Caught My Eye
- The Snowflake IPO – the biggest software IPO ever (link)
- Where did the wood go? Lumber and building products are the latest COVID victims (link)
- BP says we may have already reached “peak oil demand” and is shifting its strategy (link)
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