S&P 500 Breaks New Record; Small Business Picture Is Different
Published Friday, August 21, 2020; 8:00 p.m. EST
(Friday, August 21, 2020; 8:00 p.m. EST) It's a tale of two economies: coronavirus hurts small businesses while the tech giants are immune.
The Standard & Poor's 500 closed at a new record high, but the recovery picture in the overall U.S. economy is not as bright.
The 60 leading economists surveyed in mid-August by "The Wall Street Journal" expect a gradual decline in the unemployment rate to 4.9% by the end of 2023.
However, pre-covid, unemployment dropped to as low as 3.5%, and economists don't expect to re-approach that level, "full employment," for at least several years. To be clear, a complete recovery from the pandemic will take years.
Driven largely by the earnings expected of Facebook, Apple, Amazon, Netflix, Google, and Microsoft, the Standard & Poor's 500 stock index closed Friday at 3,397.16, a new all time high.
While the S&P 500 is full valued relative to its historical norm, it's not trading at anything near an outlandish multiple of expected profits. Valuations on stocks are nothing like the tech-stock bubble in 2000.
Even as the S&P 500 booms, however, the broader economy remains less strong than before the pandemic.
"Despite the recent gains in the (U.S. Leading Economic Indicators) LEI, which remain fairly broad-based, the initial post-pandemic recovery appears to be losing steam," according to economists at The Conference Board, "The LEI suggests that the pace of economic growth will weaken substantially during the final months of 2020."
The Standard & Poor's 500 is one of 10 components of the U.S. Leading Economic Indicators. The LEI is a better way of seeing the expected road to recovery and more accurately reflects what's happening in the real economy.
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