US Data Analysis: Reopening is a double-edged sword, S&P 500 bulls have reasons to worry

Shop until you drop – retail sales figures are showing a V-shaped recovery. Headline retail sales are up 7.5% monthly, better than 5% expected. Zooming out, expenditure is up 1.1% in June 2020 from the same month in 2019. Other figures such as core sales and the control group are also up.

Checks worth $1,200 to every American, a federal weekly top-up of $600 for the unemployed, and plenty of cash to corporations and small businesses have kept the consumption afloat. Moreover, the reopening that began in early May accelerated – at least throughout most of June.

S&P 500 was up on the year and near the record highs seen in February. Are these gains justified? 

No.

Stubbornly high jobless claims

The other data point published on Thursday was initial jobless claims for the week ending July 10 – and that remained stubbornly high at 1.3 million, worse than expected, and very similar to the figure in the previous week. 

More recent data is showing the price of reopening. US COVID-19 cases surged from mid-June and have triggered halting the reopening and reimposing restrictions. While consumers have become used to shopping online, dining out and consumption of experiences is set to suffer. And with it – those who work in these industries. 

The figures due out next week are for the current week – when Non-Farm Payrolls surveys are held. They may already show an increase in initial applications. 

At the time of writing, S&P 500 is on the back foot – unimpressed from retail sales statistics. Are investors facing reality and becoming more worried? 

It is essential to note that ample liquidity from the European Central Bank – which has stressed its commitment – and from the all-powerful Federal Reserve, is keeping equities bid. 

But for how long? The peak may be just in front or perhaps already behind.