We are telling clients we expect Q4 and Q1 economic data to be “lumpy.” Huh? What’s that supposed to mean? Basically, we’re talking about inconsistent results.
As we head into Q4 earnings season here, we believe reports across the board will widely vary, with some really good and some really bad, and perhaps some companies just flat. And the expectation is that trend will be reflected across sectors and even within peer groups.
Overall, we know that the economy is weakening a bit. According to the Wall Street Journal, the jobs number that came out this morning was much worse than expected with 140,000 newly unemployed in December, the worst number we have seen since April of last year. However, the unemployment rate remained steady at 6.7%.
What might explain this inconsistency? It could be that the losses were counted in a prior month, or workers found new jobs, or they just opted to not look for a new job. It will be hard to know how this develops until we get further into the first quarter.
And inconsistencies in the data like this are what we expect to be the norm as the economy begins to come back more permanently from the Covid-19 pandemic.
In industries like restaurants, airlines, tourism and hospitality we have seen some recovery in related stocks, but the actual revenues are not inspiring… yet. But as we have been saying, investors are looking toward the back half of the year, when more and more of us will be vaccinated or have some level of immunity and the pandemic will subside and allow for increasing activity.
Other industries like retail, tech, consumer hard goods and any remote service business are doing extremely well. This also produces inconsistencies in the numbers reported and, as a result, surprises both on the upside and the downside should be expected in related indices.
So welcome to a lumpy start to 2021. Let’s hope things start to smooth out as the year moves on.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.