29 May WE ARE LIVING IN UNIQUE TIMES

Posted at 13:14h in Market Commentary by
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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%.

 

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