Economic Reopening Continues In Earnest

Economy Normalizes

The economy normalized quickly from lockdown to neutral from March to mid-June as shown in the chart below. Interestingly, the opening of the economy started slowing a week after the cyclical stocks peaked on June 8th. The stock market probably predicted this change by looking at the rate of change of new COVID-19 cases. There was a spike in a few hotspots in the south and the west which spread in July. 

From mid-June to late August, the index only increased from 63 to 65 which signals the economy was stuck in neutral. When the index was in total lockdown, most of the economy was shut down. There weren’t any winners. Even the tech stocks fell.

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When the index is in neutral, there are winners and losers. The economy opening stocks like airlines lose, while the tech stocks, which thrive on people working from home, win. Good news for the stocks that do well when the economy is open is that the index rose 7 points to 72 in the first week of September which is a new high. In my opinion, this index will get back to the 80s this fall. 

We probably won’t see updates unless someone posts Goldman Sachs’ report, but we will be able to tell from other economic data points if the economy reopened further. Just check airline stocks in October to see if that's right. Many are not buyers of airlines because there are less risky ways to play the economy reopening, but they are an easy indicator to review (JETS ETF).

Job Postings Pick Up Slightly

The jobless claims report left many scratching their head because of the major runup in PUAs in the past 2 weeks. With the spike in California potentially related to fraud, it’s tough to see how the labor market is doing using that metric. The good news is we have other metrics. As you can see from the chart below, job postings growth on Indeed increased in the 2nd half of August. It’s now down 19% from last year.

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