They all offer a gauge of whether life is returning to normal -- on the assumption that economic activity should improve as well.

“How good the information they carry will be known when we know if hard, traditional data is following the pointers we are getting,” said Binay Chandgothia, portfolio manager at Principal Global Investors. “For now, they are the only real information sources and they seem like logical datapoints.”

Betting on V
Optimists point to the shock 2.5 million increase in U.S. payrolls and decline in the unemployment rate to 13.3% as firmer evidence of a rebound.

Goldman Sachs Inc. economists led by Jan Hatzius argue that if global GDP is now rising, the recession will be the deepest -- but also the shortest -- since World War II. Morgan Stanley Chief Economist Chetan Ahya holds a similar view, arguing that upside surprises in economic data points to a “deep V-shaped recovery.”

Stocks have moved to price that in. With corporate earnings having collapsed thanks to the lockdowns, the price-to-earnings ratio of the S&P 500 currently sits at 25.6 times, the highest since the dotcom bubble, and far above the average of just under 17 since the start of 2000.

Investment-grade corporate bonds have also come back, with yields hitting record lows, pulled down by the powerful rally in government debt. While 10-year U.S. Treasury yields have climbed from their March lows, analysts surveyed by Bloomberg see them staying below 2% for years to come, effectively held down by the Fed and continued disinflation.

“The big hope is that this optimism, which reflects the silver lining of this historic shock, proves right,” said Mohamed El-Erian, chief economic adviser at Allianz SE and a Bloomberg Opinion columnist. “But every element requires politicians to remain highly focused, put political polarization aside and appropriately evolve their policy approaches.”

--With assistance from Adam Haigh.

This article was provided by Bloomberg News.

First « 1 2 » Next