Even with record drops in economic activity, financial asset pricing has held up.

It should be no surprise that retail sales and industrial production dropped by record amounts in April. When we close stores, restaurants and force people to stay home, consumption expenditures will decline by huge amounts. When we close manufacturing factories, industrial output and capacity utilization will drop by huge amounts. These record setting declines did not drive valuations in financial markets. What is important to investors is the shape of the business cycle coming out of the closures. Economic activity is beginning to resume in many parts of the country.

 

PROBANK AUSTIN ADVISOR - MAY 18, 2020