Is The COVID-19 Surge Stalling The Global Economic Recovery?

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On the latest edition of Market Week in Review, Director and Senior Investment Strategist Paul Eitelman and Research Analyst Laura Bardewyck discussed the latest global economic data releases as well as recent geopolitical developments. They also reviewed November’s strong performance in global equity markets, including the outperformance of the value factor relative to the growth factor.

Global growth plateaus amid rise in COVID-19 cases

In general, newly released economic data from around the world points to signs of a slowdown in growth, Eitelman observed. Case-in-point: the November U.S. employment report, he said. The latest survey from the Bureau of Labor Statistics, published Dec. 4, showed that the U.S. economy added 245,000 nonfarm payrolls last month—down from 610,000 additions in October.

“This number represents a pretty marked deceleration, although it’s important to note that it’s still reflective of positive growth—albeit at a much slower pace,” Eitelman remarked. Digging into the details a bit further, he said that the report captured broad weakness on the services side—particularly in the leisure sector, which has been hammered by COVID-19 lockdowns this year. All told, the latest snapshot of the U.S. labor market offers up some early evidence that the resurgence of the coronavirus is taking a bit of a toll on the nation’s economy, Eitelman stated.

Broadening his focus to a global scale, he noted that while recent European retail sales numbers demonstrated resilience, global PMIs (purchasing managers’ indexes) largely showed a plateauing in growth. While the manufacturing sector held up reasonably well, the latest surveys showed that the services sector is decelerating—especially in Europe, where more significant lockdown measures were imposed last month, Eitelman said.

The slowdown in global growth due to increasing COVID-19 infections is not too surprising, he remarked, adding that the team of Russell Investments strategists remains positive on the medium-term outlook. “While there are some notable challenges in the short term, the six-to-12 month outlook continues to look more favorable, especially given the recent slew of positive vaccine announcements,” Eitelman explained.

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