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 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).
What’s Changed Since Our Last Update?
The biggest changes from the last update are two indicators that have moved into the green: 1) homebuying/refinancing, where US homeownership rates have risen to 68%, levels not seen since the global financial crisis, and 2) financial conditions, where high-yield credit spreads continue to decline. We’re also seeing uptrends in travel and leisure as well as school status, as districts roll out a variety of reopening plans. There’s been some progress on the public-health front, but the battle continues.
- Globally, the number of confirmed coronavirus cases continues to rise—it’s currently about 25 million.
- The R0, which tracks the average number of cases spread by one person, is currently just below 1.0 globally, down from its recent peaks. The US rate is about 0.90, its lowest since May.
- Declining hospitalizations are off considerably from mid-July peaks, especially in US hotspots like Texas and Florida.
- There’s hope of a vaccine, but it’s still in the testing phase and still a while from being ready for use.
- US school districts are preparing a variety of reopening plans including alternating attendance days, delayed starts, virtual classes and in some cases all in-person instruction.
- Higher education has begun to return for the first semester with mixed results. Outbreaks at some schools have prompted moves to hybrid classes: virtual lectures but in-person sessions for smaller classes.
Travel and Leisure:
- US flights have recovered from their lows and are improving incrementally, down 47% year-over-year. Global flights show a similar pattern of gradual improvement, with countries like the UK and Germany down about 64% year-over-year.
- In the US, “OpenTable” bookings are improving, down 53% from last year’s levels. Globally, bookings have rebounded strongly, down 40% year-over-year.
- Airbnb and VRBO searches are up about 25% from last year’s levels.
- Based on Google and Waze Mobility Data on actual miles driven, mobility is increasing globally, particularly in areas like the UK, Germany and Spain. Brazil and Australia have seen mobility trends decline in recent weeks.
- Subway traffic in China is down 12% relative to last year, indicating that people have started returning to public transit. This could mean a potential resumption in economic activity.
- While low interest rates have fueled strong refinancing activity, but activity could slow further as Fannie Mae and Freddie Mac look to impose new fees on home refinancing.
- Home-buying activity has continued to improve, as US homeownership rates have accelerated to 68%, levels not seen since the global financial crisis. The number of people searching for home loans is up 18% year-over-year.
- Building permits in New York City and Los Angeles have been robust—but flat compared with trends over the last several years.
Employment & Household Finances:
- US jobless claims have slowed, though 58 million people have filed for unemployment benefits since mid-March. Euro area unemployment remains around 7.8%.
- Credit card spending data has recovered to just 4% below 2019 levels, but the bottom quarter of spenders are outlaying 10% less than last year due to expiring unemployment benefits.
- Congress has yet to pass more fiscal stimulus to support households—policymakers remain divided along party lines.
- US personal savings as a percentage of disposable income remained elevated in July at 17.8%, though down from 33.5% in April.
- Based on Simfund and ICI data, about $70 billion has moved into bond funds since the beginning of August, as investors shifted out of money-market accounts and into slightly riskier but higher-paying investments. Equities have continued to see outflows of about $7 billion over the same period.
Financial Conditions (Policies, Spreads and Curves):
- High-yield spreads continue to decline, having fallen to approximately 475 basis points as measured by the average option-adjusted yield spread of the Bloomberg Barclays US Corporate High Yield Index.
- Oil prices remain stable in the low-to-mid $40 per barrel range.
- China’s coal consumption has recovered from its lows, with minor variations around the normal level.
- In late August, the US Federal Reserved changed its policy on inflation targeting, shifting to an average 2% inflation target over the long-term to allow more inflation variability. Investors’ inflation worries have boosted gold prices by approximately 30% year-to-date, near the all-time highs set earlier in the month.
- Glassdoor data from March showed that 71% of employer reviews citing COVID-19 were negative. This share has been trending down: only 43% of current COVID-19 related reviews are negative, indicating that employee sentiment could be improving.
- Corporate health remains mixed given ongoing pandemic pressures. But secular growth trends have accelerated and companies levered to these trends are in much better shape than others. This is visible in the large premium for growth companies versus their value peers. While these companies might seem expensive in price-to-earnings terms, they don’t seem all that rich after accounting for the growth they’re generating.
- Per Bloomberg consensus, 2020 earnings-per-share (EPS) estimates have improved slightly from their lows for both the US (S&P 500) and world (MSCI World). But the market remains focused on 2021 earnings, with US stocks trading at about 21 times earnings and global stocks at about 19 times.
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.