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More signs of normalcy in society

April 06, 2021

Graph depicting top ten gross box office receipts

Source: Box Office Mojo

Signs of a return to normal in U.S. society have continued to mount even as the new COVID case count has picked up again in recent weeks. Air travel and restaurant activity both hit new highs for the cycle last week, for example, with the latter coming up just shy of its pre-pandemic level. Last week was also marked by the best performance at the box office in 13 months, as the top ten films grossed $37.7 million, more than double the previous weeks’ tally. This is still a far cry from normal – the top ten movies typically bring in more than $170 million per week at this time of year – but it came amid what continue to be unusually challenging conditions (capacity limits in theaters, a limited slate of films in wide release, heightened in-home competition (last week’s box office champ, Godzilla vs. Kong, was also available on HBO Max), etc.). Moreover, survey results since the early days of the pandemic have consistently suggested that moviegoing would be among the last activities to come back, with one recent study showing a discomfort level exceeding that of riding in a taxi, going to the gym, shaking hands, and every other major activity save taking public transportation. If consumers are beginning to head back to the theaters, then, it should be taken as a compelling sign that a broader normalization is taking hold and that the bar for a COVID-driven relapse is being set increasingly high.

At the same time, it would also lessen a more recent structural tailwind. The U.S. corporate tax rate is now below the developed world average, but would move to the top end of the range under the infrastructure proposal. It is telling that there is a revenue component here — perhaps an early hint that debt concerns are growing again in Washington — but this also, of course, means an offsetting headwind to the tailwind of the investment itself.

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What was the only bear market in the S&P 500 in the last five decades that was not accompanied by a recession in the U.S. economy?

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