June 24, 2020

HCM BuyLine
The HCM BuyLine® is strong and the trend continues upward. The markets are working off a period of being overbought, but any pullback should be shallow and short lived. Again, pullbacks should be bought. The markets, along with the economy, are recovering in a V-shaped pattern and we see this continuing. Employment might not come back as fast as we would all like. As we saw in 2008 and 2009 after the layoffs, many companies reassess and see how many people they really need to do the job at hand. This does lead to higher corporate profits as well as a higher stock market.

Leading Indicators Jump:

The Conference Board’s Leading Economic Index (LEI) rebounded a record 2.8% in May, its first increase in four months, and above the consensus of 2.4%. Seven of its ten components made positive contributions, led by fewer initial jobless claims. On a year-over-year basis, the LEI was down 10.6%; still close to the steepest decline since the GFC, but an improvement in momentum compared to the previous month. Historically, this indicator has bottomed a median of three months before the end of recession, which would suggest an end of the current recession in Q2 or early Q3. 


The Markit flash PMIs showed a marked improvement in June as businesses continued to reopen following the COVID-induced lockdowns, providing further evidence of a near-term recovery in the U.S. economy. The manufacturing PMI jumped 9.8 points to 49.6, just modestly below its break-even level of 50.0. Services, which were more acutely impacted by the pandemic, contracted at a much slower pace as the sector’s business activity index surged 9.2 points to 46.7, a four-month high.

New orders and export orders continued to decline, albeit at a much slower pace. Employment contracted only modestly, as businesses brought back some furloughed workers. Even so, still-weak demand caused some employers to shed workers to cut costs, indicating that the recovery is not without obstacles. The 12-month outlook jumped back into positive territory to a four-month high, following negative readings in May and April. Both input and output prices picked up for the first time since February due to continued supply chain disruptions and rising demand.

The Richmond Fed Manufacturing Activity Index surged a record 27 points in June to a neutral reading of 0, the highest level since March. Similar to the PMIs, the Services Sector Index also improved, but not quite to the same degree, jumping 20 points to -28, a level still indicative of deep contraction. Most manufacturing and services firms expect conditions in the region to improve over the next six months

New homes sales jumped 16.6% in May, the most in nearly a year and the second-largest gain since 1992, to a 676,000-unit annual rate. This beat the consensus for an increase to a 640,000-unit rate. The prior month, however, was downwardly revised by 43,000. Three of the four regions (except for the Mid-West) posted double-digit gains in May. New home inventory fell 2.2%, resulting in 5.6 months of available supply, the lowest since February. This suggests that the new-home market is fairly balanced. On a year-over-year trend basis, the median new home price was down 0.7%, while the mean price was off 3.3%.

COVID-19 Update:

TSA Total Travelers
Interestingly, the TSA traveler throughput data is still tracking this trendline. On June 10, 2020, the first date of trendline shown throughput was 430,414 and as of Monday, June 22, 2020, it is 590,456, +37% in 12 days.  And this traffic growth is still following this trendline closely. As ludicrous as it sounds, it implies traffic could recover by August 2020.  We realize capacity reductions, etc. might limit this:

  • But this trendline is a "V" recovery in travel
  • So far, TSA traveler throughput is recovering on this exponential trendline

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