We are living in extremely unique times. Yesterday many were elated that continuing unemployment claims, claims which tally ongoing benefit claims in state programs, fell to 21.2 million. Moreover, the prior week’s data was revised nominally lower as opposed to revisions to the upside which has occurred during the past nine weeks. Analysts were expecting 25.7 million.

As inferred above, I think this data is significant perhaps suggesting the job market might be healing at a pace faster than anyone expects. I must write, however, one week is not a trend.

With the above written, I never would I think such horrific data would be treated with great relief.

Speaking of abnormal thinking, initial jobless claims “only” rose by 2.1 million., the eighth consecutive week of declines. This data was also met with relief. For what it is worth department approximately 40 million jobs have been lost since March.

Next week May’s employment data is released. The current WAG (Wild $% Guess) is an unemployment rate of around 20%, the highest since the Great Depression when it peaked at an estimated 25.6%.

Also released yesterday was the first estimate of first quarter growth. The economy contracted by a 5.0% annual rate, nominally higher than the 4.8% expected decline. Personal Consumption declined by 6.8% versus the forecasted decline of 7.5%. The data was largely ignored for such is expected to rapidly deteriorate in the second quarter with growth plunging anywhere from 25% to 40% on an annual basis.

To write the incredibly obvious the speed of the reopening will greatly influence the data.

Equities reversed a nominal gain to close nominally lower on rising Chinese tensions. The President is expected to hold a press conference today to discuss China. Some also pointed to the massive state deficits, deficits that have exploded even more under Covid, in various states such as NJ, CA and CT as a possible catalyst for the nominal selloff.

As noted several times, I think the next major issue facing the economy will be municipal finance, a multi-year issue that will be filled with vitriol and partisanship.

What will happen today?

Last night the foreign markets were down. London was down 1.04%, Paris down 0.86% and Frankfurt down 1.06%. China was up 0.22%, Japan down 0.18% and Hang Sang down 0.74%.

The Dow should open nominally lower on Chinese tensions.The 10-year is up 8/32 to yield 0.67%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.