Show Transcript
With the holiday shopping season underway, so-called alternative data is showing a U.S. economy on the mend. But the omicron variant is creating uncertainty. Anthony Okolie speaks with Xin Chen, Vice President and Director of Asset Allocation, TD Asset Management, about the outlook for the U.S. economy.
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- Xin, we're now to the peak holiday shopping season. And investors are looking to alternative data to gauge the real time impacts on the economy and corporate profits. So to start off with, what trends have you seen over the past few weeks in terms of mobility, specifically air travel?
- Right, so we pay particular attention to air traveling. Because it's a great representation for the pent up demand, how things normalize, how consumers spend on the service side of the economy. So according to data published by TSA, Transportation Security Administration, there have been a steady rebound of air traveling scanned at US airports since September when Delta variant peaked. And that rebound was accelerating after early November. That was around the time the US reopened its border.
And we see the Thanksgiving air travel was particularly strong. So as the chart show here, the number of people passing through the US airports are approaching almost 90% of the number in Thanksgiving week of 2019. And that is the highest ratio so far this year benchmarking to 2019 same week comparison.
- And what about global air travel? Are you seeing similar trends there as well?
- Yeah, certainly some strong rebound from 2020, which is a low bar you could argue. However, it's not as strong as the domestic US traveling. So a lot of hiccups happening globally on the COVID front, which prevents the speedy recovery there. So current volume is still down more than 20% compared to 2019. And for December to December 2019, that's roughly still the level. It was below the benchmark 2019.
- OK, so Black Friday and Cyber Monday, both shopping days are now behind us. What's the latest data telling you about recent holiday sales?
- Right, so US spending has been very strong since September. People expected some weakness due to Delta variants and inflation dampening consumers' confidence. But we didn't see that earlier part of this fall. Part of the reason could be people actually came out to spend. They worry about not getting their holiday items due to the supply chain issues.
So now we are actually seeing a little bit disappointment on the holiday sales. Like for example, Salesforce published Black Friday and Cyber Monday spending. Same period year over year growth was 3% to 5%, so still positive growth. But it was lower than the expectation of 7% to 10% expected by many. So e-commerce in particular may be disappointing here.
- And obviously, the discovery of this new COVID variant changes everything. And we've certainly seen an increase in volatility in the stock market. What's the latest data telling you about market liquidity?
- Right, so we have been noticing the liquidity flagging on the tightening side since about the end of October. So we track market depth, which basically is the quantity of buys and sells on certain assets. So it could be on commodities, bonds, and the major equity futures.
And that has been deteriorated particularly into this holiday season. And we expected that to continue into late December and probably into January as well. So it's certainly something bothering the market right now. It's not supporting the market. And whenever news hit the market, we're going to see the market see-sawing.
- So given what we know today, what are some key takeaways for investors?
- Right, so we are still constructed longer term. I mentioned global activities are still holding up, if it's not strong enough. But it's being resilient, despite so many headwinds. And US spending is still at record high. Although, there's a high bar to cross there, which may prevent the equities to rally easily from here.
But we are not bearish. There are still very good reasons to believe the recovery has legs here, despite the variants emerging again and again. But we will go through this. We believe it's just a short term volatility we are seeing. So as a team, we are looking to add risk at equities along the pullbacks.
- Xin, thank you very much for your time.
- Thank you so much.
[MUSIC PLAYING]
- Right, so we pay particular attention to air traveling. Because it's a great representation for the pent up demand, how things normalize, how consumers spend on the service side of the economy. So according to data published by TSA, Transportation Security Administration, there have been a steady rebound of air traveling scanned at US airports since September when Delta variant peaked. And that rebound was accelerating after early November. That was around the time the US reopened its border.
And we see the Thanksgiving air travel was particularly strong. So as the chart show here, the number of people passing through the US airports are approaching almost 90% of the number in Thanksgiving week of 2019. And that is the highest ratio so far this year benchmarking to 2019 same week comparison.
- And what about global air travel? Are you seeing similar trends there as well?
- Yeah, certainly some strong rebound from 2020, which is a low bar you could argue. However, it's not as strong as the domestic US traveling. So a lot of hiccups happening globally on the COVID front, which prevents the speedy recovery there. So current volume is still down more than 20% compared to 2019. And for December to December 2019, that's roughly still the level. It was below the benchmark 2019.
- OK, so Black Friday and Cyber Monday, both shopping days are now behind us. What's the latest data telling you about recent holiday sales?
- Right, so US spending has been very strong since September. People expected some weakness due to Delta variants and inflation dampening consumers' confidence. But we didn't see that earlier part of this fall. Part of the reason could be people actually came out to spend. They worry about not getting their holiday items due to the supply chain issues.
So now we are actually seeing a little bit disappointment on the holiday sales. Like for example, Salesforce published Black Friday and Cyber Monday spending. Same period year over year growth was 3% to 5%, so still positive growth. But it was lower than the expectation of 7% to 10% expected by many. So e-commerce in particular may be disappointing here.
- And obviously, the discovery of this new COVID variant changes everything. And we've certainly seen an increase in volatility in the stock market. What's the latest data telling you about market liquidity?
- Right, so we have been noticing the liquidity flagging on the tightening side since about the end of October. So we track market depth, which basically is the quantity of buys and sells on certain assets. So it could be on commodities, bonds, and the major equity futures.
And that has been deteriorated particularly into this holiday season. And we expected that to continue into late December and probably into January as well. So it's certainly something bothering the market right now. It's not supporting the market. And whenever news hit the market, we're going to see the market see-sawing.
- So given what we know today, what are some key takeaways for investors?
- Right, so we are still constructed longer term. I mentioned global activities are still holding up, if it's not strong enough. But it's being resilient, despite so many headwinds. And US spending is still at record high. Although, there's a high bar to cross there, which may prevent the equities to rally easily from here.
But we are not bearish. There are still very good reasons to believe the recovery has legs here, despite the variants emerging again and again. But we will go through this. We believe it's just a short term volatility we are seeing. So as a team, we are looking to add risk at equities along the pullbacks.
- Xin, thank you very much for your time.
- Thank you so much.
[MUSIC PLAYING]
