Good Wednesday Morning (and still the best day of the week),

The 10-yr back below .60%. that is really the news. Mortgage bonds doing a bit better; Stocks continuing to roll on, albeit a bit slower than we’ve seen and become accustomed to. We need to say a big thank you to the Fed which continues to buy mortgages like it’s eating Doritos (one of my favorite junk foods that I can’t put down). The Fed is without question keeping rates lower than they would otherwise be. There was some data today which showed that existing home sales took one of the biggest month over month jumps that we have seen in 20 years. Yesterday the US Government told China to close its consulate in Houston. Starting with the fact that I’m sure I am not the only one who didn’t know that China had an consulate in Houston, but is this the next step in escalating a trade war and tensions. The spin for us is that the uncertainty should help rates.

Speaking of equities, two charts below from the WSJ:

After the S&P dropped 30% in March, it is now positive for the year.  How that is possible defies logic, but it is where it is. The second chart shows the disconnect between stock prices, which should be based on corporate fundamentals, and their earnings. The earnings yield is the lowest in 10 years but stock prices keep going up? At some point, this has to come back into line.

And last, as the $600 a week in extra jobless aid lawmakers approved back in March as part of the $2.2 trillion Cares Act officially expires at the end of the month, it will leave some 30 million Americans in a very tough spot. Imagine losing $31,200 in yearly income. Congress is working on a fix, which I am sure will happen, albeit at a much lower bonus amount. The number I am reading is closer to $200/week is likely. In truth, there should not be an incentive to be on unemployment when there is to work, but the harsh reality is the loss of this income will be a drag on employment, retail sales, GDP, etc. This is likely to also be a drag on equities and keep rates low.
 
Please remain safe and be healthy, make today great!