Market Snapshot June 3, 2020


Good Morning on this best day of the week Wednesday,


Where do we start? Some data out today: ADP private payrolls, factory orders, and ISM non-manufacturing. The data across the board was really ugly but… not as ugly as markets were expecting. This fuzzy math is just annoying. Stocks loving the less disastrous data and the Dow is +400. Equity prices are using multiples based on ethereal forecasts at 20x 2021 earnings. Please re-read that. Stock prices are being based on 20x of next year’s earnings when we have no idea what this year’s (or this quarter’s) earnings will be, let alone what happens if we have another outbreak, trade with China halts, if company’s fail, etc. Does anyone else see a problem here?  How can you invest in stocks with this mentality? With stocks jumping, money is flowing out of bonds. The 10-yr is at .75% (up 9 basis points from Monday) and mortgage bonds are -21bs on the day but really only -2 since this time yesterday. I would expect that through the day, both treasuries and mortgage bonds will claw back some of the early losses. Friday is still the big day with the BLS jobs report. Current market expectations are for job losses of 1mm (would be the lowest since the second week of the Covid outbreak) and an unemployment rate of 19.8% (as bad as that number is, it is even uglier for minorities, women, and the 24 and younger crowd without secondary education).


Please stay safe and healthy, Make today great!