I just returned from an enjoyable family vacation to Sedona, Grand Canyon, Monument Valley, & Arches National Park. I hope you were able to get away this summer somewhere to recharge as well.

I was unfortunately greeted with news headlines again looking grim?


Let’s pause and take stock. Why are the headlines terrible?

Because the media loves drama. This is not news to you or me or anyone who pays attention. The 24-hour news cycle is there to whip up emotions and keep us glued to the latest “BREAKING NEWS.”
So, what’s behind the noise, and should we worry?

Before we jump into unpacking the news, let’s take a moment and remind ourselves of how far we’ve come since the pandemic began.
You can see it right here in this chart:

We’ve recovered the vast majority of jobs lost since the bottom of the pandemic’s disruption last April. The economy is still missing several million jobs to regain pre-pandemic levels, but we’ve made up a lot of ground, and jobs growth is still strong.

There are more job openings right now than job seekers to fill them. You see that locally, with all of the help-wanted signs in windows and online.
But there’s an important caveat to the chart above.

The monthly jobs report is what economists call a “lagging” indicator, meaning that it’s telling us where the economy was, not where it’s going.

Economists turn to “leading” economic indicators that help forecast future trends to figure out what may lie ahead.

So, what are the leading indicators telling us about the economy?
A couple of the most popular indicators are manufacturing orders for long-lasting (durable) goods since companies don’t like to order expensive equipment unless they need it soon.
Another one is groundbreaking (starts) on new houses, which indicate how much demand builders expect for housing.

Let’s take a look:

Both indicators suggest continued (if bumpy) growth. Now, those are just two sectors, and we want to be thorough, so let’s take a look at a composite.

The Conference Board Leading Economic Index (LEI) gives us a quick overview each month of several indicators.

It increased by 0.7% in June, following a 1.2% increase in May, and a 1.3% increase in April, showing broad but slowing growth.

What does that tell us? That the economy still has legs.

Will the delta variant derail the recovery?

A severe slowdown due to the delta variant seems unlikely, but we could potentially see a bumpy fall, especially in vulnerable industries and areas with surging case counts.
There’s also some potentially good news about the delta variant that we can take from other countries.
India and Great Britain both experienced delta-driven surges earlier this summer.

And what happened?

Both countries saw a steep and scary rise in case counts and hospitalizations followed by a rapid decline. The timelines for both countries were about 45 days from their start to the peak in case counts. These stories were on the news nightly with new records and then that coverage vanished. To give you some context (and hope), today is day 42 of the Delta variant surge in Florida.

It seems that these fast-moving delta waves might continue to burn themselves out.
Unfortunately, these surges come with a painful human cost to patients, overburdened medical staff, communities, and families.

But, if this pattern holds in the U.S., it doesn’t appear that the economic impact will be heavy enough to derail the recovery.

All this to say, it’s clear that the pandemic is still not over.

But we’ve come such a long way since the darkest days of 2020, and the road ahead still seems bright (if a little potholed).

Please try to take panicky headlines ( covid, market, wildfires) with a grain of salt and often remember times the media magnify the “crisis” to increase viewers, which increases their advertising revenues.
Our whole firm is here, and we’ll keeping watch if any of these issues become more of an investment issue for you.

Have questions? Please feel free to reach out to us.

Michael