Every Picture Tells a Story: “Chartbook” Look at Economy/Market

Key Points

  • Visual look at the latest trends and statistics across the spectrum of the economy, policy and the stock market.

  • Stocks’ rally off the lows is not inconsistent with historical trends; albeit at warp speed.

  • Emphasis on quality is likely to continue to lead the performance derby.

On a day that started with good news on an experimental COVID-19 vaccine, with the stock market showing strong early gains, today’s report is more visual and less wordy than normal. Since I know not every reader of these publications follows me on Twitter—where I’m constantly posting charts, tables and data that I find compelling—this report has a sampling of what has recently caught my eye (and some bright spots). It combines economic, monetary and market data (in that order), while also a connecting of the dots between the economy and the stock market.

Let’s start with the “Weekly Economic Index” (WEI) created in March by the Federal Reserve Bank of New York. It encompasses 10 high-frequency and timely components, and is a good broad assessment of the hit to the economy. As you can see, “hit” is an understatement as the index has plunged through even the worst levels of the 2008 Global Financial Crisis (GFC).

Woe is WEI

Source: Charles Schwab, Bloomberg, as of 5/9/2020. Daniel Lewis, Karel Mertens, and Jim Stock, “Monitoring Real Activity in Real Time: The Weekly Economic Index,” Federal Reserve Bank of New York Liberty Street Economics.

Retail sales were also eye-popping, with a -16.4% plunge in April. Sales in most categories fell more in April than March; with traditional retail and leisure spending hit hardest—including an epic 90% implosion in clothing store sales. Even categories that held up well in March were hit, including grocery and healthy/personal care stores (grocery stores are still up 10% since February). There was some positive news as online retail sales were up 8.4% in April.

Retail Sales Implode

Source: Charles Schwab, U.S. Census Bureau, Bloomberg, as of 4/30/2020.

Of course it’s not just the consumer side of the economy suffering, with an 11.2% drop in industrial production in April. That was the largest decline in the index’s 100-year history (including the Great Depression and WWII). The decline was led by a 13.7% drop in manufacturing output, which plunged to its lowest level since mid-2009; and a drop to 61.1% in capacity utilization (a post-WWII record low).

Industrial Production’s Record Drop

Source: Charles Schwab, Federal Reserve, Bloomberg, as of 4/30/2020.