A good week for most equity markets with the exception of some emerging countries, particularly China. There is definitely a summer lull type of feeling to the last few weeks, but earnings results are trickling out and the numbers are coming in solid. Through Thursday roughly 18% of S&P 500 companies have reported Q2 earnings. As you can see below, 86% beat earnings estimates and earnings are up +99% y/y, helped by easy comps. The percentage of S&P500 companies beating sales estimates has soared so far this quarter to the highest level since ‘09.
More housing data this week told us what we already know – the market for homes is surging. Existing-home sales increased in June, snapping four consecutive months of declines (the declines were largely due to a lack of inventory). Existing home prices were up over +23% y/y in June, as you can see below.
Inventories remain tight. Total housing inventory at the end of June amounted to 1.25 million units, up 3.3% from May’s inventory and down 18.8% from one year ago. Unsold inventory sits at a 2.6-month supply at the current sales pace, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020.
And for all the talk about higher interest rates, the rate on the average 15-year mortgage hit an all-time low this week of 2.12%.
Finally, we found out this week that the COVID recession of 2020 lasted only two months. The NBER Business Cycle Dating Committee (yea, that’s a real thing apparently) has determined that the U.S. economy hit a low point in April 2020 after peaking in February 2020. The two-month recession is the shortest on record.
The 2020 recession ended the country’s longest recorded economic expansion, which began in June 2009 and lasted 128 months, as you can see below.
The other thing that jumps out from the table above is the fact that expansions, once they start, tend to last a long time. The chart below highlights this as well. On average expansions last over five years (although the range of outcomes is wide).
Even the shorter expansions have tended to run a minimum of at least three years. Not to say that this expansion couldn’t end sooner, but it would probably take another COVID-like shock or a policy mistake to trigger a downturn. Time will tell.
Charts We Found Interesting
1. The growth in Delta cases is striking (although there are hints the U.K. might have seen the worst of it).
2. If there is good news it is that hospitalization and mortality rates haven’t followed case counts higher.
3. More on the decoupling of case numbers and deaths from the U.K.
4. What jumps out from the chart below is the fact that life expectancy was falling in the U.S. even before COVID.
5. You think housing is nuts in the U.S? Well take a look at Canada. Borrowing to fund the down payment is never a good sign!!!
6. The Economist had a good article on climate change this week. One of the key points is that even relatively small changes in average temperature will likely to lead to more extreme weather events.
7. First publicly accessible TV broadcast from United States to Europe by Telstar satellite was today 1962.
Have a good weekend.
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