Please find attached today’s Weekly Digest.
I set out below two of the data series mentioned in the article, to help give some context:
1) Citigroup’s Economic Surprise Index. A recent string of strong data points (retail sales, employment numbers, manufacturing surveys) has seen the Citi US economic surprise index reach the highest level on record:
2) Global retail, transit and workplace activity, with the picture supplemented by never-before available real-time data from Big Data accumulators (e.g. Google and Apple) . We have been tracking attendance at retailers, transit and workplace through publicly available mobile tracking data. As a result of stronger performance in America, suggesting an earlier trough than we had pencilled-in (the end of April, rather than the end of May) and a sharper initial bounce. The data is, however, far from stable or consistent across regions and the margin for error remains high:
Our central case economic scenario, whilst being aware of now evenly balanced upside/downside possibilities, remains summarised by the outlook set out below that has been our framework since COVID-19 became a global pandemic. Recent data gives us increased conviction of this:
Investors are beginning to look past COVID and we believe it is right to do so. The outlook for corporate profits and dividends has ceased to deteriorate and investment markets are discounting a reasonable scenario. COVID risks have not been removed, but they are diminishing and are largely near term (and we are investing for the long term for you). The magnitude of investment downside has been underwritten by “whatever it takes” global fiscal and monetary policy harmonisation. When COVID is decisively put behind us, the consequences of COVID-control policy will be confronted. At that time, the removal of support and the de-synchronisation of global fiscal & monetary policy may cause a “Bernanke moment” of vertigo in financial markets. That, however, would almost certainly be a consequence of a positive (COVID) outcome and so should not be feared today. Altogether, we believe a balanced approach is appropriate.