It’s been a week or so since some states have chosen to reopen. Let’s see how that has impacted flying and restaurant traffic.
As you can see the recovery is shallow even in those states that have started to reopen. Restaurant traffic is still down 94% in those states.
Flying has started to recovery, but is still down 93% (instead of 96%) year-over-year.
Based on this data, we cannot expect a V-shaped recovery for the U.S. economy – EVEN if all states reopen.
Back in March, I posted that I think you’d be better off buying Verizon, Colgate, etc. than buying 10-year bonds at 0.6%. That was fairly close to the market lows.
However, the market has rebounded the last few weeks and now seems fairly ahead of itself. Here is a graph of the forward P/E (Price to Earnings ratio). I have a few entries for 2020.
You can see that back in March, stocks were very cheap based on earnings expectations at the time. However, stocks are up about 30% off their lows and earnings expectations have declined considerable and so now stocks are at their highest forward P/E since the tech bubble.
And I think these expectations are still way too high. Look at the expectations for the change in earnings across quarters.
Analysts are expecting almost a full recovery in earnings by Q4. I’ll take the under on that.