The Conference Board leading economic indicator index shows that the economy may have recouped more than half of its lost output during the pandemic, which justifies the stock market rally to this point. From here, though, gains may be more challenging given the uncertainties of further fiscal stimulus and the upcoming presidential election.
The recovery in the leading indicator came much quicker than in previous recessions, explaining why the equities have wiped out their loss this year. Here’s a chart comparing the leading indicator and the S&P 500’s trailing EPS.
Separately, the University of Michigan’s survey shows consumer confidence has stabilized, but it remains at depressed level. The current account deficit widened to the lowest since 2008, underscoring a long-term drag on the dollar.