How to Read the Dashboard
Our crisis dashboard includes signals from three areas: 1) public health, 2) the consumer sector and 3) financial markets. By pulling big data from traditional sources (earnings growth and gross domestic product, for example) and nontraditional sources (like Google Trends and Glassdoor), we can create a better mosaic of the road back. Public health, of course, is the key: until vaccines are broadly available, the cascading impact of the virus may continue.
The dashboard color codes (red, yellow or green) indicate the current state of each signal, while the arrows indicate the trend (improving, deteriorating or unchanged).
What’s Changed Since Our March Update?
Vaccine progress is enabling economic normalization, though vaccine availability varies widely country by country, and some nations remain as COVID-19 hot spots. Mobility is improving, particularly in the US, and schools are planning to move away from virtual learning plans the next academic year. Corporate health has improved, too. As the global economy rebounds, inflation is emerging as a medium-term concern for investors.
- Globally, the number of confirmed COVID-19 cases—currently about 171 million—has stabilized in developed countries. However, some emerging countries, including India, remain hotspots.
- About 61% of US people 18 and over have received at least one vaccine dose, with 40% of the population fully vaccinated. Vaccinations continue in other nations, albeit at a slower pace, with 5% of the world population fully vaccinated.
- The R0, which tracks the average cases spread by one person, has been declining and is currently below 0.9 globally. In hotspots like India, R0 remains elevated but has been declining—having recently fallen below 1.0.
- Many US schools have moved away from virtual learning plans for the 2021/2022 school year, as Pfizer’s vaccine has recently been approved for use in children as young as 12.
- For the fall semester, many colleges and universities are requiring students to be vaccinated to attend in-person classes.
Travel and Leisure:
- Travel demand has topped pre-pandemic levels as US consumers are hungrier for vacations. The number of people searching for vacations is double pre-pandemic rates and its highest in five years.
- Despite slower vaccine distribution in other parts of the world, global vacation searches have returned to pre-pandemic levels.
- In May, the Center for Disease Control revised its mask guidance for vaccinated people, fueling restaurant bookings and enabling broader normalization of behaviors. US “OpenTable” bookings are up 4% versus January 2020 levels, with New York at its highest level since the start of the pandemic.
- Mobility data in the US is up 20% relative to January 2020 levels. In Europe, the UK is up 10% and Germany 15%.
- Low interest rates, delayed return-to-office plans and new demand for more space have fueled intense demand for residential housing: existing home sales were up 34% year-over-year in April.
- Refinancing activity remains elevated compared with recent history, but higher rates have tempered refinancing from earlier this year.
Employment & Household Finances:
- US initial jobless claims have declined to their lowest since the pandemic began, though 83 million people have filed for unemployment benefits since mid-March 2020.
- The US unemployment rate remains at 6.1% as of April, ticking up slightly as people continue to tap elevated unemployment benefits. However, the unemployment rate is less than half its early pandemic peak of 14.8%, as the US economy continues improving.
- In late May, President Biden announced a $6 trillion spending proposal that would increase funding to areas like scientific research, renewable energy, infrastructure and family support through programs such as affordable child care and paid leave.
- After a third round of fiscal stimulus in March, US personal savings remain elevated at 15% of disposable income. That’s well above pre-pandemic levels, signaling improved finances for many consumers.
- Investor optimism has been driving massive equity inflows in recent months. From the beginning of March through the week ended May 19, equity funds have seen inflows of $179 billion, based on Simfund data. Bond fund inflows have also continued, with about $121 billion over the same period.
- According to The Investment Company Institute, despite continued inflows into equity and bond funds, money-market fund assets had risen from their December low of $4.3 trillion to $4.6 trillion through late May, suggesting that some investors may be taking gains from ongoing market strength or are looking to put new cash to work.
Financial Conditions (Policies, Spreads and Curves):
- High-yield spreads remain near the lowest in recent history—just 296 basis points at the end of May. That’s up only 10 basis points from the low of 286 basis points in early May, based on the average option-adjusted yield spread of the Bloomberg Barclays US Corporate High Yield Index.
- After rising to a high of 1.74% at the end of March, the 10-year US Treasury yield has declined modestly but remains around 1.6% at the end of May.
- Investors have begun to price in higher inflation and a reaccelerating US economy, as vaccine distribution promotes normalizing activity. Many believe that inflationary pressures could be transitory, but this development bears monitoring: persistent inflation could prove challenging for financial markets over the medium term.
- Oil prices have largely remained rangebound since early March, with West Texas Intermediate Crude trading at approximately $68 per barrel as of June 1.
- Cryptocurrencies rallied for much of 2021 before falling precipitously in May. The Bloomberg Galaxy Crypto Index, which tracks the largest cryptocurrencies traded in US dollars, fell 41% from its early May highs. Gold, in contrast, is up 13% from its March lows, as investors’ inflation concerns grow.
- After a generally strong earnings season, earnings expectations are now considerably higher than the $172 earnings-per-share estimate at the time of our last update. Based on Bloomberg consensus, investors now expect 2021 S&P 500 earnings of $187. The same trend is true globally, with the MSCI World Index expected to deliver $145, up from $132 at the time of our previous update.
- This year, the market is largely being driven by earnings and less by multiple expansion, a healthy development from 2020. The S&P 500 is trading at 22.5 times earnings, with global stocks trading at about 20.5 times.
Scott Krauthamer is Global Head of Product Management and Strategy at AB. Jonathan Berkow is Director of Data Science for Equities at AB.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.