Markets in a Minute: Economic Growth
The economy grew at a torrid pace in the first half of the year. While the second half will likely see some slowing, earnings should continue to grow, partly offset by a contraction in multiples.
Despite the resurgence of COVID-19, the US consumer remains healthy …
- Restaurants, hotels, gyms continue to see increased foot traffic, even in “hot” spots
- Air traffic remains at about 80% of pre-pandemic levels
- Consumer spending is now above its pre-COVID trend, driven by service-oriented purchases
- Savings rates are very healthy, providing plenty of ammunition for further spending
… and manufacturing continues to rebound despite supply chain bottlenecks
- ISM Manufacturing index missed expectations (59.5 versus 61.0 expected), but looking under the hood the report had plenty of positive news
- New orders component has been above 60 for 13th month in a row
- Inventories remain low and will need to be rebuilt, suggesting more production ahead
- Prices paid fell sequentially, though they are still quite high, indicating further price increases to come
- Employment index rose, signaling that companies are finding workers
- Some publicly-traded restaurants reported they have been able to staff up
Meanwhile earnings season for the S&P 500 – despite some high-profile misses – continues to gather steam …
- 83% of companies have beat already improved expectations
- Revenues were similarly strong
- Highest year-over-year earnings growth since Q4 2009
- Profit margins have reached 13%, their highest level ever
Kestra Investment Management shares Markets in a Minute every other week to help you stay on top of the latest market trends.
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