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Disappointing Data Help Flip the Script

We will not experience a “v-shaped” economic recovery, as many people hope and expect.

The government can distribute and print all the money it wants, but it can’t make people spend. This is the problem with the stimulus efforts.

Are people eating out? Well, in places that are ahead of our recovery timeline, like Germany and Italy, restaurant revenue is still down.

Despite our reopening, restaurant reservations are still down, according to OpenTable. For instance, Miami restaurant bookings are down 84 percent from 2019. People are coming back, yes, but there’s still a long way to go.

Are people driving? Gas consumption is up from the COVID-19 low, which saw about a 50 percent drop in demand. But it’s still down 20 percent from last year. Like dining out, the answer is yes, people are driving more, but not as much as before.

Similarly, airport travel is up in recent weeks. As of the COVID-19 low, about 100,000 people per day boarded airplanes. Now we’re hovering around 350,000 per day.

Great! Except last year, 2.5 million people per day boarded airplanes.

The difference is huge. And it’s compounded when you realize those people aren’t renting cars, booking hotel rooms, eating at restaurants, and so on.

Lastly, a technical indicator is showing something amiss about the recovery.

Usually there is a 90 percent correlation between stock prices and corporate earnings – as earnings go, so do prices. Well, recent correlation between S&P 500 earnings and stock prices dipped to -0.9, meaning prices and earnings have an inverse relationship – one goes up, the other goes down.

The script is flipped is right now, leaving us in an illogical scenario.

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