The Numbers & “Heat Map”

Posted on November 3, 2020 by The Weekly Commentary

THE NUMBERS

Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP increased at a 33.1% annualized pace in Q3. The U.S. economy has now recovered about 2/3 of its lost output owed to the COVID-19 pandemic.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 1/3 in Q2, the sharpest year-over-year decline since 2008. Q3 earnings season, which is just beginning, is expected to show strong improvement over Q2.
EMPLOYMENT	VERY NEGATIVE	The unemployment rate declined to 7.9% in September, from a peak of 14.7% in April. While the rebound is material, the jobless rate remains well above the historical average.
INFLATION	POSITIVE	The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	A second major pandemic stimulus bill is likely to be passed after the Presidential Election.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system; however, economic activity remains well- below that in 2019, and uncertainty remains high, particularly with the election just eight days away.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on October 27, 2020 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 1/3 in Q2, the sharpest year-over-year decline since 2008. Q3 earnings season, which is just beginning, is expected to show strong improvement over Q2.
EMPLOYMENT	VERY NEGATIVE	The unemployment rate declined to 7.9% in September, from a peak of 14.7% in April. While the rebound is material, the jobless rate remains well above the historical average.
INFLATION	POSITIVE	The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	At this point, it appears as though a second major coronavirus stimulus bill will not be passed until after the Presidential Election.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system; however, economic activity remains well- below that in 2019, and uncertainty remains high, particularly with the election just eight days away.

The Numbers & “Heat Map”

Posted on October 13, 2020 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 1/3 in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing. Q3 earnings season kicks off this week, led by the major U.S. money-center banks.
EMPLOYMENT	VERY NEGATIVE	The unemployment rate declined to 7.9% in September, from a peak of 14.7% in April. While the rebound is material, the jobless rate remains well above the historical average.
INFLATION	POSITIVE	Core inflation has come in at 1.7% over the last twelve months. The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	At this point, it appears as though a second major Coronavirus stimulus bill will not be passed until after the Presidential Election.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system; however, economic activity remains well- below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on October 6, 2020 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 1/3 in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	The unemployment rate has declined to 7.9%, from a peak of 14.7% in April. While the rebound is material, the jobless rate remains well above the historical average.
INFLATION	POSITIVE	Core inflation has come in at 1.7% over the last twelve months. The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well- below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on September 29, 2020 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 1/3 in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	About 1.4 million U.S. jobs were added in August, in-line with market expectations. The American economy has now added back roughly half of the 22 million jobs lost since March. The unemployment rate remains well above historical averages, at 8.4%.
INFLATION	POSITIVE	Core inflation has come in at 1.7% over the last twelve months. The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accommodative stance in his virtual address “at Jackson Hole”.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well- below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on September 22, 2020 by The Weekly Commentary

THE NUMBERS

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	With over 90% of companies in the books, S&P 500 earnings have fallen by around 33% in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	About 1.4 million U.S. jobs were added in August, in-line with market expectations. The American economy has now added back roughly half of the 22 million jobs lost since March. The unemployment rate remains well above historical averages, at 8.4%.
INFLATION	POSITIVE	Core inflation has come in at 1.7% over the last twelve months. The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accommodative stance in his virtual address “at Jackson Hole”.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on September 15, 2020 by The Weekly Commentary

THE NUMBERS
30-year mortgage rate is as of 8/28/20.

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. In mirror opposition, Q3 GDP is expected to represent the greatest quarter-over-quarter increase in history, coming in somewhere between 25-35% on an annualized basis.
CORPORATE EARNINGS	VERY NEGATIVE	With over 90% of companies in the books, S&P 500 earnings have fallen by around 33% in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	About 1.4 million U.S. jobs were added in August, in-line with market expectations. The American economy has now added back roughly half of the 22 million jobs lost since March. The unemployment rate remains well above historical averages, at 8.4%.
INFLATION	POSITIVE	Core inflation has come in at 1.7% over the last twelve months. The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accommodative stance in his virtual address “at Jackson Hole”.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on September 8, 2020 by The Weekly Commentary

THE NUMBERS
30-year mortgage rate is as of 8/28/20.

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. Although the figure is staggering, it was in-line with economists’ expectations. Retail sales increased 1.2% in July, a healthy mid-pandemic result, but sharply below June’s 7.5% rise.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings fell by around 33% in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	About 1.4 million U.S. jobs were added in August, in-line with market expectations. The American economy has now added back roughly half of the 22 million jobs lost since March. The unemployment rate remains well above historical averages, at 8.4%.
INFLATION	POSITIVE	Core inflation increased 0.6% in July; the largest one-month jump since 1991. However, on an annualized basis, CPI is running at a moderate 1.6%, below the Fed’s 2% target. More sustained indications of inflation will be necessary before the central bank curbs its stimulative policies.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accomodative stance in his virtual address “at Jackson Hole”.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on September 1, 2020 by The Weekly Commentary

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. Although the figure is staggering, it was in-line with economists’ expectations. Retail sales increased 1.2% in July; a healthy mid-pandemic result, but sharply below June’s 7.5% rise.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings have fallen by around 33% in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.
EMPLOYMENT	VERY NEGATIVE	1.8 million jobs were added in the U.S. during July. While gains, rather than losses, are welcomed, the figure represents a considerable deceleration from the 4.8 million jobs added in June. Unemployment remains very high at 10.2%.
INFLATION	POSITIVE	Core inflation increased 0.6% in July, the largest one-month jump since 1991. However, on an annualized basis, CPI is running at a moderate 1.6%, below the Fed’s 2% target. More sustained indications of inflation will be necessary before the central bank curbs its stimulative policies.
FISCAL POLICY	VERY POSITIVE	Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accomodative stance in his virtual address “at Jackson Hole”.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

The Numbers & “Heat Map”

Posted on August 25, 2020 by The Weekly Commentary

US ECONOMY
CONSUMER HEALTH	NEGATIVE	GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. Although the figure is staggering, it was in-line with economists’ expectations. Retail sales increased 1.2% in July; a healthy mid-pandemic result, but sharply below June’s 7.5% rise.
CORPORATE EARNINGS	VERY NEGATIVE	S&P 500 earnings have fallen by around 33% in Q2, the sharpest year-over-year decline since 2008.
EMPLOYMENT	VERY NEGATIVE	1.8 million jobs were added in the U.S. during July. While gains, rather than losses, are welcomed, the figure represents a considerable deceleration from the 4.8 million jobs added in June. Unemployment remains very high at 10.2%.
INFLATION	POSITIVE	Core inflation increased 0.6% in July, the largest one-month jump since 1991. However, on an annualized basis, CPI is running at a moderate 1.6%, below the Fed’s 2% target. More sustained indications of inflation will be necessary before the central bank curbs its stimulative policies.
FISCAL POLICY	VERY POSITIVE	In light of the expiration of federally granted, weekly unemployment support, and an absence of congressional progress towards the next round of stimulus, President Trump signed an executive order provisioning fiscal support. However, the legality of the order, and whether it will actually come into effect, are in question.
MONETARY POLICY	VERY POSITIVE	The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS	VERY NEGATIVE	The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS	VERY NEGATIVE	The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

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The Weekly Commentary

Observations of the current state of the stock and bond markets

Category Archives: The “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”

The Numbers & “Heat Map”