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Stocks Opened Little Changed

Investors continue to weigh the economy’s reopening and stimulus support against increasing COVID-19 cases in southern and western states. Asian markets were mixed overnight with Hong Kong among the laggards on China tensions. European markets are lower in midday trading.

Week Ahead

This week’s economic calendar brings several housing data points, Markit’s US Purchasing Managers’ Index (PMI), durable goods orders, personal spending and income, and Michigan consumer sentiment. In addition, the Federal Reserve will release the results of its annual bank stress test Thursday at 4:30 p.m. ET.

Economic Surprises Exemplify Uncertainty

Economists have been scrambling to assess the economic landscape following the outbreak of COVID-19, and the unprecedented situation has led to massive beats and misses relative to consensus forecasts. The Citigroup Economic Surprise Index, a proprietary gauge that aims to capture deviations from consensus forecasts, has had a volatile year in 2020. Following a plunge to all-time lows in April, the index has now surged to record highs.

COVID-19 News

New cases on Sunday rose 26.8% over the week-ago figure, while 28 states have experienced an increase in the seven-day average case totals, according to Pantheon Macroeconomics. Thousands of businesses are reopening in New York as part of phase two. German cases rose for a third straight day with over 1,000 cases at one meatpacking facility. China reported only nine new infections.

Road to Recovery Playbook

We have updated the five signals that—combined with real-time indicators of economic activity—are telling us that markets are progressing to the next phase of the road to recovery. While valuations and sentiment temper our enthusiasm for equities in the near term, and we would like to see stocks break out to new highs before declaring a convincing beginning to the next bull market, signs of increasing economic activity in recent weeks have been encouraging. More on that story in the coming days.