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 there’s a vaccine, 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).
Since our last update, we’ve seen trends improve meaningfully in home refinancing and household finances as well as commodity prices. Corporate earnings guidance for 2020 remains cloudy, but we’ve seen somewhat of a stabilization as the market begins to look ahead to 2021 earnings.
We’ll continue to update this data as we move forward.
- Globally, the number of coronavirus cases continues to rise—it’s currently about 4.6 million. Cases are still rising in some part of the world, such as Brazil, but the increase is decelerating.
- We’re seeing improvement in Europe, Asia, and parts of the US (due to increased testing).
- The R0, which tracks the average number of cases spread by one person, is currently around 1.0 globally and declining, while case estimates from Johns Hopkins University are slowing.
- More schools globally have shut their doors, and closings could last longer than expected. This includes closures for the rest of the current school year (120,000 schools in the US alone).
- Higher education is suffering. Many schools are preparing for online classes to continue in the fall, which would likely slash the number of students willing to pay high prices for higher education.
Travel and Leisure:
- Travel restrictions are widespread but have been loosening since mid-May. Transportation Security Administration data is showing a slight improvement in flight volumes with US origin, based on traveler throughput.
- ”OpenTable” bookings are down 95%, a modest improvement from 100%.
- Google search trends for “vacation idea” have dropped everywhere except Asia. China, for example, has seen searches picking up relative to 2019. In the US, searches are at 50% of the 2019 level, an improvement from down 100%.
- Google search trends for “hair salons” had fallen off sharply (dropping 80% from last year in the US), but have slowly been rising. US searches are now down only 25% relative to last year.
- Mobility is increasing globally, but many are refraining from using public transportation (Google Mobility Data).
- Refinancing activity is showing signs of improvement, a result of low interest rates, though some banks may not be able to handle current demand.
- New construction is slowly picking up from its lows in certain parts of the world (notably the Los Angeles market in the US).
Employment & Household Finances:
- US jobless claims continue to rise, with 36 million filings in the past eight weeks.
- Nearly 60 million jobs across the European Union and UK are still at risk.
- Credit card spending data shows a rebound to only 9% below 2019 levels.
- US personal savings as a percentage of disposable income rose from 8% to 13% between February and March.
- In Europe, it’s estimated that household savings rates could increase by as much as 20 percentage points to 36% on average in the second quarter, according to Eurostat. That’s a lot of precautionary savings that could represent pent-up demand.
- China’s personal savings rate is expected to reach 34% the end of 2020 (Source: Trading Economics).
- Globally, outflows continue from most risk assets, with money funds and cash benefiting. We’re starting to see money flow back into bond funds (last week was the strongest in the past two months, based on Strategic Insight data).
- According to Bank of America’s latest Flow Show report, money-market funds attracted another $35.6 billion in the week ending May 13 (the smallest amount since late February). This pushed the year-to-date total to $1.2 trillion. Equity funds saw outflows of $6.2 billion, with the bulk coming from emerging markets.
- Despite sizable rescue packages, conditions still seem tight. Credit spreads are above average (currently around 750 basis points and 678 basis points excluding the energy sector). But they’ve pulled back from their highs.
- A significant rise in defaults is certainly coming (the high-yield default rate is already at 4.8% as of May 14). While liquidity isn’t as big a concern as it was in the worst of the crisis, concern is building about the ability of some companies to stay solvent.
- Coal consumption in China is slowly picking up again—it’s up about 6.6% from last year.
- Oil prices are finally stabilizing, having returned to the high 20’s per barrel.
- Copper prices are also stabilizing (around $2.33 per pound), after rising from March’s levels.
Corporate Earnings Guidance:
- 2020 earnings-per-share (EPS) estimates are still in freefall, with no bottom in sight. However, the market is focusing on 2021 earnings, with stocks trading at a multiple of about 20.
- More than 100 companies in the S&P 500 have withdrawn guidance altogether.
- Glassdoor trends in employee attitudes highlight a disparity between companies that prepared well for work-from-home scenarios and those that didn’t.
Scott Krauthamer is Global Head of Product Management and Strategy at AB. Jonathan Berkow is Senior Quantitative Research Analyst and Alternative Data Lead 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.