While the President’s health, the upcoming election, and additional fiscal support are all presenting uncertainty for the market, the incoming economic data continues to support our positive recovery narrative.

The initial growth rebound as pandemic lockdowns were eased was uniformly strong as substantial pent-up demand was released in most economic sectors (supported by massive government stimulus and very easy credit conditions).

We are now seeing growth moderate from the early rapid rebound but we remain confident that a sustainable economic recovery will support stock prices as we head toward 2021—despite delays in follow-on fiscal support that is needed for sectors most affected by the pandemic. Last week, we received several important monthly readings on consumer and business confidence, manufacturing, and state-level indicators that suggest the recovery remains on track.

Consumer and Business Confidence Rebound Continues

The Conference Board’s Consumer Confidence Index jumped in September by the most since April 2003, and well above consensus expectations. It was led by the biggest gain in consumer expectations since May 2009, on notable improvement in the outlook for future business conditions and jobs. Confidence increased across all demographic, nearly all income groups, and in eight of the nine Census regions. The broad-based improvement boosted purchasing plans for the next six months. Plans to buy a car, a home, or major appliances all increased.

Confirming the Conference Board’s reading, The University of Michigan Consumer Sentiment Index jumped to the highest level since March, and above the consensus estimate. It was the biggest monthly gain since November 2016, with both current conditions and consumer expectations improving. The increase in confidence and purchasing plans bode well for consumer spending growth in the near term.

The Business Roundtable CEO Economic Outlook Index rebounded in the third quarter, swinging back into positive territory after one quarter in contraction. Expected capital expenditures, employment, and sales all showed improvement.

Manufacturing Improvement Continues

While the ISM Manufacturing Index suggested a moderation in the manufacturing recovery, growth remains broad-based, with 14 of the 18 ISM industries expanding. Survey respondents were mostly optimistic about the outlook, order backlogs accumulated at the quickest rate since November 2018, while the customer inventories index fell to its lowest level since June 2010 (implying future production growth to replenish inventories).

State Indexes Support Recovery Narrative

The Philly Fed State Coincident Indexes increased in 48 states in August and decreased in two. This implies broad-based economic growth has resumed across the country after the lockdowns ended in late spring.

While Friday’s job report showed a less than expected 661,000 gain, weakness was concentrated in education at the state & local government levels, which declined -280,000, as many schools opened late or only partially. That will likely reverse in October, as more schools fully open. Private payrolls rose better-than expected with job gains broad-based across sectors.

Meanwhile, aggregate household net worth reached an all-time high in the second quarter and likely rose further in the third quarter—supported by strong gains in financial and housing markets. Job gains and higher net worth bode well for future consumption and ultimately economic growth and profits.

This report is provided for informational and educational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities or a recommendation for any strategy or to buy, sell, or hold any product. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed here. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s prior written consent. This presentation has been prepared by Janney Investment Strategy Group (ISG) and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor.

About the author

For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

To learn about the professional background, business practices, and conduct of FINRA member firms or their financial professionals, visit FINRA’s BrokerCheck website: http://brokercheck.finra.org/