Saturday, May 30, 2020

Macro Update

Here's the up-to-date graph of our proprietary macro index (you're sitting down?):

Click each insert below to enlarge...

Yes, as you know, economic conditions are historically not good. Which, as you'd fully expect, are being reflected in:

The 10-yr US Treasury Note Yield:

The price of copper:

The Raw Industrial Materials Index:

The Baltic Dry Index:

The Global Purchasing Managers Index:

The US Consumer Price Index:

Global Inflation:

US Consumer Spending:

And of course the Fed has responded -- in a manner that shatters all historic paradigms:

Fed Balance Sheet:

So where has all of that liquidity (in the $trillions) gone? Or what's it impacting?


Consumer Savings:

Junk Bonds:

Stocks (Nasdaq Comp Stock Index):

Bottom line: Financial asset prices are responding thus far precisely as the Fed hoped they would.

Of course the 7 trillion dollar (size, today, of the Fed's balance sheet) question is, can the Fed keep financial assets artificially buoyed long enough for the real economy to catch up? And if they do, will stocks and junk bonds, for example, remain so (under the weight of historic mounds of existing, and additional, debt on the surviving companies' balance sheets) when the Fed then turns down (it would be silly of me to say "off") the tap?

We'll see...

In the meantime the risk/reward setup is, to put it mildly, precarious...

Have a great weekend!

No comments:

Post a Comment