Covid-Induced Departure from Cities Slowing, Benefits Keeping Americans Unemployed, Europe on Path to Normal

It appears the mass exodus from cities due to Covid fear in cities is slowing down as the number of people moving out of apartments to buy houses has somewhat normalized. And with the return of college students, companies who focus on apartment rentals have been outperforming. Meanwhile, residential and nonresidential construction spending are going in very different directions as returning to the office still isn’t a priority. Many in the U.S. remain out of work, but reports show that in states where unemployment benefits ended earlier. Are potential workers intentionally not going back to work until these benefits run out? We also saw “reopening” stocks underperforming this week and due to stockpiling certain sectors could be on a longer road to normalization. Looking overseas, Europe seems to be on a similar path back to “normal” as their July PMI reports continue to show strength. But the Eurozone PPI index is still in the upper end of its multi-year range—will inflation across the pond also be transitory?

1. It looks like the Covid-induced flight from the cities and this cohorts buying of new homes is returning to normal levels:

Source: The Daily Shot, from 8/4/21

2. The return of college students and the aforementioned demand peak has put a bid under REITs: cohorts buying of new homes is returning to normal levels:

Source: Wall Street Journal, from 8/4/21

3. The construction industry is still out of whack; residential demand is at a record yet the lack of “go back to the office” shows a dearth in commercial construction:

Source: The Daily Shot, from 8/3/21

4. More proof of the law of unintended consequences:  The extra unemployment provisions are keeping many workers on the sidelines:

Source: The Daily Shot, from 8/4/21

5. Part of normalization includes certain companies/sectors returning to previous levels of sales and earnings. Due to stockpiling, there may even be a pullback in sales/earnings:

Source: The Daily Shot, from 8/4/21

6. With bond yields so low, the 60/40 portfolio will likely no longer give the desired returns.  Investors must take on more risk to achieve previous levels of return. The record print below is evidence this is happening:

Source: BofA Global Investment Strategy, from 8/4/21

7. Interesting:

Source: LPL Research, from 8/4/21

8. More normalization as the pent-up demand for goods begins to wane:

Source: The Daily Shot, from 8/3/21

9.Is Europe following the U.S. in its own recovery and normalization?

Source: IHS Markit, from 8/3/21

10. Will overseas inflation also be transitory?

Source: The Daily Shot, from 8/4/21

11. On Monday we mentioned how Covid was ravaging much of Asia. Here is a synopsis of some major economies’ PMIs:

Source: IHS Markit, from 8/4/21