Equities led by oil advanced for a second day. Hopes are rising on progress for the treatment of the disease, the development of a vaccine, and the continued reopening of the domestic and global economy.

Gains were cut on fears that tensions with China may rise and from a Fed warning of more potential damage to the economy.

Today the ADP Private Sector Employment report is released. An unfathomable 21 million private sector jobs are expected to be lost in April. As written many times the released data will be horrific but that was yesterday, looking into the proverbial rear-view mirror.

Volumes have been written about the shape and speed of the recovery. The simple fact of the matter is no one knows. One can find ample data to validate one’s confirmation bias.

Some can argue that the most extremist and sensationalist outcomes are the one’s that should be expected given the incredible events of the last six weeks. It is the trend and as many say the “trend is your friend.”

I continue to believe the odds favor inflationary growth, the result of massive Fed intervention amplified by the lack of labor, the result of extremely generous unemployment insurance that may hinder the supply of available workers.

Most global governments are now exploring ways to finance the incredible explosion of debt that has been issued to combat this crisis. For example, the US is considering issuing a fifty year bond, Germany is gearing up to originate its first ever 15 year bond, and Spain and Italy formed creative selling syndicates to raise funds.

Speaking of financing, how will municipalities raise money? Yesterday the NY Metropolitan Transit Authority came to market with debt yielding 5.2%. Illinois short term debt offering failed, defined as the yield was too high and the state pulled its offering. These yields are comparable to emerging market yields.

As noted the other day, I think the next crisis will be in municipal finances, a crisis that will take several years to resolve and one that will be filled with political acrimony.

What will happen today?

Last night the foreign markets were up.; London was up 0.60%, Paris down 0.22%, and Frankfurt up 0.06%. China was up 0.63%, Japan closed for a holiday and Hang Sang up 1.13%.

The Dow should open nominally higher as more states to attempt to reopen. Oil is up another 3% to over $27.25 barrel. The 10-year is off 5/32 to yield 0.68%.


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