Noisy Summer: Headlines May Be Obscuring a Persistent Recovery
While challenges related to the COVID-19 pandemic remain, evidence suggests that the post-crisis rebound can continue.
- Markets may still be underestimating the historic fiscal support and unprecedented money support enacted by governments worldwide in response to the COVID-19 pandemic. Global commitments to these measures are enormous – including in Europe, where even a traditionally resolute Germany has agreed to the European Union spending package.
- With fixed income yields likely to remain low, equities may be “the only game in town.” What’s more, the stock market is not the economy. The sectors arguably most damaged by the COVID-19 crisis and its aftermath – retail, restaurants, entertainment, airlines, cruises, and hotels – contributed only 7% of the S&P 500®’s total operating earnings in 2019.
- In the United States, a “Phase 4” spending package will be a crucial component of the near-term economic recovery. The government’s response has been key to keeping American consumers afloat during the pandemic. The importance of addressing shortfalls to state and local government revenues is a major factor in the recovery’s trajectory. It is estimated they will need $550 billion in support.
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