Stocks continue to make new highs and we remain constructive on equities, given strong earnings and underlying economic momentum.

The resurgence of the virus has impacted business and consumer sentiment. However, there are signs that we may be at the peak in U.S. cases as the effective reproduction number is declining in approximately 40 states, according to, a disease monitoring tool developed by Yale School of Public Health.

While we are likely past the peak in economic growth, we remain solidly above trend. We see a healthy consumer with pent-up demand supporting further economic growth. We also remain encouraged by the healing labor market—we now have more job openings than unemployed Americans by a remarkable 1.3 million. It may be prudent to stay bullish on equities unless there is a good reason to believe a recession is imminent—equity bear markets rarely occur outside of major business cycle downturns (Janney Investment Strategy Group and BCA Research).

Labor Market Continues to Heal

Last week’s JOLTS report showed the number of job openings jumped 6.2% in June, its sixth consecutive gain, to 10.1 million—a record level. This compares to nearly 9 million Americans that remain unemployed. Three industries (professional and business services, retail trade, and accommodation and food services) accounted for over 80% of the monthly increase in openings. Hires rose an even larger 11.6%, the biggest gain on record outside of the pandemic, to 6.7 million.

In addition, the July employment report showed robust progress toward full employment, with 943,000 payroll jobs added and the unemployment rate falling to 5.4%. While businesses continue to struggle with worker shortages, we expect progress on this front in the coming months as the pandemic fades, kids go back to school, and generous unemployment benefits expire. These labor market gains are important for a sustainable economic recovery.

Leading Indicators Show Moderating Growth at Above-Trend Levels

The OECD Composite Leading Indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, show signs of moderating growth at above-trend levels in the OECD area as a whole and in most major economies.

The latest CLIs point to signs of moderating growth at above-trend level in the United States, Japan, and Canada. Similar indications have emerged in the United Kingdom and in the euro area as a whole, including Germany and Italy. In France, there are also signs of moderating growth, with the CLI still below trend.

The CLIs for the major emerging-market economies point to diverging developments. Steady growth continues in China, and stable growth continues in India, but in Brazil the CLI continues to indicate slowing growth. Signs of moderating growth have emerged in Russia.

Very Healthy Earnings Season

With 91% of the S&P 500’s market capitalization having reported second-quarter earnings, earnings are beating estimates by 16%, with 84% of companies topping projections, according to Janney Investment Strategy Group analysis. Expectations are now for second-quarter revenue and earnings growth of 26% and 87%, respectively. These healthy earnings numbers are important for business confidence, future capital spending and hiring plans, and for the ability to return capital to shareholders in the form of dividends or buybacks.

Thoughts on Senate Infrastructure Bill

The Senate passed a nearly $1 trillion infrastructure bill last Tuesday, formally called the Infrastructure Investment and Jobs Act, in a bipartisan 69-30 vote. The bill now heads to the Democrat-controlled House and looks likely be tied to a separate $3.5 trillion bill focusing on other Democratic economic priorities, including child care, education, and environmental measures. It will likely take several months for Congress to finalize these bills.

The bill calls for investing $110 billion for roads and bridges, $66 billion for rail, $55 billion for water and wastewater infrastructure, and $39 billion for public transit, in addition to billions for airports, ports, and the nation’s first network of electric vehicle charging stations. While modern infrastructure is critical for economic productivity, we expect the direct economic impact to be modest because the spending will take a few years to ramp up and will be spread over the rest of the decade. Please see our note from last week for more details.


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 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: