Recovery Slows, Equities Hit Resistance, and Small-Cap Non-Earners Hit Historic High
September 23, 2020 | FIRESIDE CHARTS
As Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin’s testimony on the economic recovery continues today, we see that momentum is slowing—though the manufacturing sector is still showing signs of strength. Equities have also eased off the gas and appear to have hit a long-term resistance level—will it hold? Finally, though we might typically expect to see small caps outperform during this phase of the economic cycle, anemic earnings and historic leverage during the coronavirus era have contributed to ongoing weakness. Will the trend continue into 2021?
1. The Chicago regional Fed survey is confirming a slowing recovery…
Source: The Daily Shot, from 9/22/20
2. The sharpest V recovery we have seen yet…
Source: The Daily Shot, from 9/23/20
3. It looks like the surge in do-it-yourself investing is having the usual outcome…emotionally driven selling…
Source: The Daily Shot, from 9/23/20
4. Are the markets poised for a longer-term consolidation or will the Covid environment continue to defy history?
Source: The Daily Shot, from 9/22/20
5. Historically, small caps out-perform in the recovery phase of an economic cycle, but Covid seems to have its own cycle so far…
Source: Russell Investment Group, FactSet, BofA US Equity & US Quant Strategy, from 9/22/20
6. One reason the small cap indices have lagged so badly of late: ~1/3 of the companies don’t make any money…
Source: The Daily Shot, from 9/22/20
7. With earnings subdued for many small caps, their leverage has grown to twice the “norm”…
Source: FactSet, BofA US Equity & US Quant Strategy, from 9/22/20
8. Is the ~10% decline in the USD over?
Source: The Daily Shot, from 9/23/20
9. The USD reversal has helped gold break out of its pendant pattern to the downside. It is early yet for both trends…
Source: The Daily Shot, from 9/23/20
10. Emerging market economies, and market make-ups, are evolving…
Source: MarketDesk Research, iShares, from 9/22/20
11. Europe’s second wave of Covid is hitting hard:
Source: JHC CCE, from 9/22/20
12. U.S. Covid cases have stopped declining. Return to school at all levels has not helped. The virus just waits until complacency kicks in and….
Source: JHC CCE, from 9/23/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.