The U.S. economy is uncertain, why did the stock market rise against the trend?

By yqqlm yqqlm

On August 14, local time, the U.S. Department of Commerce released data showing that the monthly rate of retail sales in the United States in July increased by 1.2%, slowing down for the second consecutive month, and lower than market expectations of 1.9%. According to data released by the US Department of Labor the day before, the number of people applying for unemployment benefits for the first time in the United States fell to less than 1 million last week. This is the first time since the new crown epidemic hit the United States in March, but it is still at a historical high.

With the release of mixed economic data, the debate on the prospects of the US economic recovery is intensifying. Not only do economists hold their own opinions, but the White House and the Federal Reserve also hold different opinions. On the occasion of the uncertain economic situation, the US stock market performed strongly. As of the close of trading on the 14th, the S&P 500 index stood at 3372.85 points, which was once again approaching a record high during the session. What is the actual cause?

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△”The Wall Street Journal” stated that this is the first time the number of people applying for unemployment benefits in the United States has fallen to less than 1 million since the outbreak in March.

U.S. Department of Labor August 13 According to data released, in the week ending August 8, the number of first-time jobless claims in the United States fell to 963,000 after seasonal adjustments, and it fell below the 1 million mark for the first time in months. This was the first time since the outbreak in March. .

Although the number of people applying for unemployment benefits for the first time has fallen sharply from the peak of 6.87 million in March, they are still at a historical high, far exceeding the record of 665,000 after the 2008 financial crisis.

The “Wall Street Journal” analyzed that the decline in the number of people applying for unemployment benefits in the past two weeks reversed the worrying upward trend in mid-July. But for the recent decline in data, there is one thing to be wary of:because the federal government’s additional $600 a week for the unemployed expired at the end of July, the unemployed’s motivation to apply for relief has weakened.

Although it is difficult to accurately assess how much influence the”motivation factor” may have, in the past, an important feature of applicants for unemployment benefits is:some people who are clearly eligible for relief, because they are afraid of trouble, they just don’t Willing to apply.

In addition, although the number of people applying for unemployment benefits for the first time in a single week has fallen to less than 1 million, economists generally advocate cautious treatment of this data because employment data from other sources is sending different signals. For example, data from Homebase, an employee scheduling management software company, shows that the number of hourly employees working in restaurants, retail stores and other small businesses has remained flat since the beginning of July, showing no signs of growth.

This is a noteworthy phenomenon, because since the outbreak, Homebase data is one of the indicators that perform well in various forecasts of the US Department of Labor’s monthly non-agricultural employment data. At the same time, data from Kronos, a labor management software company, shows that the increase in work shifts is similar to that reflected in Homebase data, indicating a weak recovery in the US job market.

“The employment recovery seems to be losing momentum.” Anne Lisabeth Conkel, an economist at the recruitment site Indeed, said that the number of jobs on the site has increased after 14 consecutive weeks, and the growth rate has slowed The lowest value since the beginning of May, “The decline in the number of first-time jobless claims is encouraging, but the road ahead is still long.” According to Reuters, US retail sales growth slowed in July. The budding economic recovery faces many obstacles.

After the”cautiously optimistic” employment data was released, the US Department of Commerce released data on August 14 showing that the US retail sales in July increased by 1.2%on a monthly basis. The growth rate has slowed for the second consecutive month, and it is lower than market expectations of 1.9%.

Among them, the monthly sales of electronic products and home appliances increased by 22.9%, the sales of clothing increased by 5.7%, and the sales of bars and restaurants that were particularly hard hit by the epidemic increased by 5%. At the same time, sales of auto parts and dealerships fell by 1.2%, leading to a decline in overall data. Sales of sporting goods and bookstores fell by 5%, while residential sales fell by 2.9%.

Analysts believe that US consumer spending in July was lower than expected because the retail sales boom in the previous month cooled. Since two-thirds of US economic activity comes from consumer spending, retail sales are regarded as an economic indicator. Previously, US retail sales surged by 8.4%in June, but the rebound of the epidemic caused the economic restart to stagnate, dragging down the sales growth trend. The slowdown in July’s growth rate reflects the decline in sales of automobiles and building materials, as well as weakness in restaurant and clothing sales.

At present, due to the different signals from a number of data, economists are also divided on the recovery momentum of the US economy.

Barclays Chief U.S. Economist Michael Capone said:”July’s overall data shows that the U.S. economy is still growing. The unresolved question is whether we can continue this momentum to 9 Month and October.”

“As the second wave of shutdowns severely suppressed economic activity, and the federal government stopped sending $600 checks to the unemployed every week, the sky seemed to darken again.”Mitsubishi UFJ Financial Group chief economist in New York, Chris Rupki, said, “If Congress and the President cannot As soon as possible, reach an agreement on how to support the budding economic recovery. As long as this pandemic is not over, the economic recession will not end.”

At the same time, the White House and the Federal Reserve interpret the prospects of the US economic recovery. Also insist on their own words.

White House National Economic Council Director Larry Kudlow predicted on August 13 that the U.S. unemployment rate will return to single digits at the earliest this month. As the economy recovers from the recession triggered by the epidemic, the third The quarterly economic growth rate is expected to reach 20%or higher.”The key point I want to say is that the economy is rebounding, it looks like a V-shaped recovery, and the recent data we see is even better than a month ago.” He said.

The optimistic view from the White House economists is in sharp contrast to the remarks of many Fed officials. These Fed officials said this week that after the epidemic rebounded again, the economic recovery is slowing and that the US economy cannot fully recover until the virus is contained. Minneapolis Federal Reserve Bank President Neil Kashkari recently stated that the epidemic is spreading rapidly in the United States, and the current US response measures are not effective. “Stricter lockdown measures” should be implemented nationwide to control the epidemic. .

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△”Business Insider” stated that in the most severe economic recession since the Great Depression, 4 reasons caused the stock market to rebound to near historical highs.

The current US economic recovery is facing There are many controversies, but the U.S. stock market has bucked the trend and rose, causing widespread concern from all walks of life.

US stocks The S&P 500 index rose 0.15%to 3378.51 points on August 14, but then fell back. It closed down 0.58 points, or 0.02%, to 3372.85 points. On August 12th and 13th, the S&P 500 index briefly broke through the record closing high of 3386.15 points touched on February 19th. On the 14th, it was close to this high again, and it was still close to the door.

As of August 12, the global stock market value/GDP reached 100.35%. This indicator is particularly high in the United States, which has climbed to a new high of 177%. At the same time, the second quarter GDP of the United States recorded the largest decline since World War II, and the rebound of the epidemic is still dragging down the economic recovery. Many investors are concerned about:Why does the stock market rise against the trend? Can the high valuation that deviates from the fundamentals last?

Integrating the views of all parties in the market, there are mainly the following reasons, which can be used to explain the disconnection between US stocks and economic fundamentals.

First, the Fed’s easy monetary policy. Through unprecedented quantitative easing, the Fed is buying US Treasury bonds and mortgage-backed securities on a very large scale to inject liquidity into the market.

In an interview with CCTV, Invesco Senior Fund Manager Li Shanquan said:”Currently, the stock market is mainly driven by liquidity. With such a large monetary easing, there will always be a lot of liquidity to the stock market.”

Financial services company LPL Financial also said that large-scale monetary stimulus has greatly increased the money supply, some of which has been invested in the stock market.”Historically, the growth of the money supply and the stock price The trend is synchronized.”

The second reason is the optimistic expectations of the market. Li Shanquan believes that the market expects that some local economies in the United States will rebound relatively strongly, at least in the near future. For example, the Atlanta Federal Reserve has raised the US GDP growth rate in the third quarter. The new estimate is a growth of 26.2%. 20.5%higher than the previous value.

In addition, the market is also confident that the vaccine can turn things around after it comes out. For example, when positive news about vaccines comes out, the attractiveness of some safe-haven assets will diminish, resulting in a decline. Reuters also reported this week that expectations for vaccine research and development are prompting investors to reduce their holdings of safe-haven assets such as gold and treasury bonds, and to buy back shares of companies that have been hit by the epidemic.

The third factor is low interest rates. Currently, the Federal Reserve maintains the target range of the federal funds rate unchanged at 0~0.25%, and reiterated that it will continue to purchase U.S. Treasury bonds and mortgage-backed securities in the next few months to lower long-term interest rates. Li Shanquan pointed out:”The interest rate is low, and the relative expected return of the stock market is significantly higher.” In other words, the stock market has become one of the few investment options at the moment.

According to”Business Insider” analysis, although stocks are expensive, they actually look cheap compared to U.S. Treasury bonds. The current 10-year U.S. Treasury bond yield is hovering around 0.6%. Discounting future profits at such low interest rates will significantly increase stock valuations.

Fourth, the power of technology. Facebook, Apple, Amazon, and Google The strong financial report released at the end of July by the parent company Alphabet once again proved this point. Of course, these technology giants are not the only ones driving the stock market. Considering that about 40%of the S&P 500 stocks are classified as technology, digital media or e-commerce, the strong performance of these stocks is very important for the overall stock market. obvious.