The markets, the economy, and the whole business cycle accelerate
A defining feature of the COVID-19 economy has been speed.
The speed with which the economy shut down last year rocked markets and the general public.
The speed with which the economy re-opened was similarly surprising.
The speed with which a COVID-19 vaccine was developed, and subsequently rolled out in the U.S., is the scientific achievement of a generation.
And as this cycle has matured, the pace of change has hardly slowed.
Last week, it seems investors almost all at once noticed the 10-year yield had fallen to multi-month lows. That move in part reflects a view that 2021’s rip roaring economic growth will not be sustained. Almost as quickly as the economy shut down and re-opened, we now see investors expecting the economy to return to its pre-pandemic trend.
Which is perhaps not a total surprise given how many areas of the economy are now outperforming their pre-COVID growth paths. Something that almost never happens this early in post-recession recoveries.
Companies representing more than two-thirds of the S&P 500’s market cap are currently growing faster than they did pre-pandemic, according to a note published last week by Deutsche Bank strategist Binky Chadha. These businesses also accounted for around 60% of the index’s sales and profits.