Macro market valuation has to consider uncertainty with any longer-term assessment. The Atlanta Fed Survey of Business Uncertainty provides good expectational information that can help with this assessment. The survey asks business managers their 4-quarter ahead expectations for sales and employment growth as well as an assessment of business uncertainty as measured by the 4-quarter standard deviation for sales and employment. December number were recently published and contain both good and bad news.
The good news is that the smoothed value for sales revenue and employment are still moving higher and the business uncertainty is falling for both series. This data suggest that businesses are looking through the current COVID case increases. The bad news is that sales revenue will still be below the average for the three years before the COVID shock. Employment growth looks to be at or above the prior three years. However, uncertainty, albeit below the high earlier in the pandemic, is still at high levels and suggests that businesses are still not sure of the environment a year from now.
While monetary and fiscal policy are providing tailwinds for markets, the direction of the real economy is still far from certain.
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