Despite the latest increase in COVID cases and the constant touting of said increase by the media, the economic recovery is still on track. The consumer, who comprises two-thirds of the U.S. economy, showed that they are alive and well with last week's Retail Sales number. And yet, investors are fearful the recovery has derailed due to the increase in COVID numbers. Henry Ford once famously said, "Whether you think you can or think you can't, you're right." In other words, we can choose to live in fear or not. Per usual, it's the data that tells the real story.
We were on track for as possible gain last week until Friday, when markets did not hear what they wanted out of Fed Chairman Powell and COVID cases were rising. Ironically, in England, all COVID restrictions ended over the weekend. Yet, COVID is dominating the headlines once again. As we've discussed, the Delta variant does not show any signs of being nearly as fatal as the original strain of COVID, which was in and of itself only more deadly for those 85 years or older. U.S. air travel is up 200% over 2020, sports venues are packed, businesses are nearly wide open. It's no surprise that a rise in cases should occur as people are travelling for vacation once again. But, cases do not correspond to hospitalizations and deaths. And, we are by the most conservative estimates, at herd immunity with vaccinations and previously infected.
It's early in the 2nd quarter earnings season, but 85% of S&P 500 companies are beating earnings estimates and 90% are beating revenue estimates. June Retail Sales beat the expected -0.4% by coming in positive at 0.6% increase. In addition, this number looks better as May's -1.3% print was revised lower to -1.7%. The Fed's Beige Book report showed "modest-to-robust" growth in the U.S. economy from late May to early July. It's true inflation came in higher month-over-month in both the Consumer Price Index and Producer Price Index. This is something Central Banks are going to struggle with over the next several months. Industrial Production also came in below estimates, but positive overall. The NFIB Small Business Optimism Index came in at the highest level in over 8 months. The Fed's Financial Conditions Index also showed no signs of any issues in the indicators that make up that index. Trading may be choppy this week until investors come to grips with the rise in COVID cases worldwide.
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