Business sector. Even as there are signs of weakness in the consumer economy, however, the business sector continues to do well. Business confidence and investment are largely back to pre-pandemic levels, and specific higher-frequency indicators are showing improvement in many cases, as we can see in this composite of many indicators from J. P. Morgan.
The big picture is that the recovery is still on track but that signs of weakness bear watching. The medical risks have improved significantly, but the economic risks are still real.
Financial Markets Hit New Highs Then Stumble
Risks Are Real, But So Are Opportunities
The economic risks are also real, and we do see some slowing in the recovery so far. That will need to be watched. But, at the moment, the recovery continues, and there is a real possibility it will accelerate again if the medical risks remain constrained or, especially, if another federal income support program is passed. The risks are real, but so are the opportunities.
Finally, while markets pulled back last week on rising perception of the risks and while more volatility is quite possible, the fact that the medical risks remain contained and that the economic recovery continues should provide support.
Given all of this, over the next couple of weeks, the most likely case appears to be continued slow improvement on both the medical and economic fronts. There are certainly risks, and we need to watch them. But for the moment, the news remains good.
Brad McMillan is the chief investment officer at Commonwealth Financial Network.
Financial markets dropped last week after hitting new highs. The new highs were in response to the positive medical news, including improvement in the new case count and encouraging news on vaccine development. The drop seemed to be due to worries about just how durable the economic recovery was. Given the data we reviewed above, those doubts seem reasonable, which suggests we might see more volatility ahead. That said, the positive medical news should provide some support for the markets through any such volatility.
The real news this week is that the pandemic is under control and that the medical risks are now contained. While there are real risks here, around the Labor Day holiday exposures and school reopenings, so far at least the news is as good as or better than we have seen in the pandemic so far.