VRG continues to monitor the daily economic environment and consider the market impacts on valuation. We have just released an update to our quarterly Economic Snapshots in 16 major economic markets to provide you with an at-a-glance visual summary of the current economic and financial indicators.
Some observations we’ve made in gathering this past quarter’s economic snapshot data:
- In the U.S., early April and May indicators seemed to show the U.S. economy was potentially entering stages of convalescence from COVID, but that data has since flattened along with retail sales data. As a result, several economic analysts suggest the U.S. recovery has stalled.
- The second-quarter brought a sharp GDP decline in the 19-member Eurozone, at a rate of 40.3%. If a silver lining is to be found in declining economic activity, we can look to suppression of the virus—new infections are coming in at moderate rates in the EU. Second-quarter U.S. GDP was the worst decline ever recorded, falling at an annualized rate of 33%.
- The U.S. equity markets have been strong, reflecting a V-shaped recovery that the overall U.S. economy has, at least so far, not delivered.
- Bond yields remain low, particularly in the EU and Japan, likely due to an increase in government borrowing being offset by private sector saving surges.
- Slowly but surely, global manufacturing PMIs show renewed growth with some readings reaching very near or just above 50. However, unemployment levels continue to be an area of concern as businesses continue cost-cutting measures seeking growth from continued virus constraints.
- Some learnings could be taken from China as its economy delivers gains after losing nearly all production capabilities. Retail sales and consumer activity remain down, so full recovery is yet to be realized. But, new COVID case numbers are also down in the first country to have met the virus head-on.
We welcome your questions and concerns about valuation impacts on your financial or tax reporting requirements, as well as any details you may have about an upcoming valuation engagement need. A VRG valuation professional will reach out to upon receiving your inquiry.