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The US economy has not hit 'peak data.' There's still plenty of room for the post-COVID boom to soar.

2 9 8
13.05.2021

There's always a reason things are about to get worse.

Throughout the pandemic, pessimistic forecasters have doubted the pace of the US economy's recovery. And now that the consensus has largely caught on to the US economic boom, there's a new story for the worrywarts: "peak-data."

The idea with "peak data" is that the pace of economic growth cannot possibly get any stronger and that growth will continue at the current pace instead of accelerating. With economic growth leveled off, so too will equity markets level off or potentially come under some pressure, so the thinking goes. Sorry, but I disagree.

There are two ways to think about economic data: momentum and the level of activity. Momentum refers to how economic conditions are changing compared to the recent past — are things picking up or slowing down? Where are things going? The level of activity measures how far conditions are from their historical averages — is the economic data right at this moment better or worse than average? How are we doing right now?

Some measures are designed to measure momentum, while others are designed to look at the level. For example, the ISM manufacturing PMI measures momentum, asking factory purchasing managers about growth relative to the previous month. By contrast, the unemployment rate would be an indicator used to measure the level of economic activity.

It should go without saying that since the market is generally concerned with future profits, the strongest period for market returns is........

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