Good Wednesday PM (still best day of the week, sorry I’m a little late),
Did you know that today is Dr. Suess Day (birthday)?
State of the Union speech last night was by all accounts underwhelming. President had a real opportunity to assert not only himself but also the US strength to the country and the world. Regardless of your politics, it was a miss. He talked of releasing 69mm barrels of oil from our reserve supply as that was an extraordinary amount. Let’s put that into context that the US uses 24mm barrels of oil/day so the release of 69mm covers us for less than 3 days. Additionally we buy 600k barrel/day from Russia (yup). Needless to say, oil prices have continued to rise despite this concession which President Biden dug deep to make. Markets are just all over the place. Equities caved yesterday and now traders think stocks look cheap, so are buying today. Money flowing out into stocks often has it flowing out of bonds which is happening today. The 10-yr is back to 1.87 and mortgage bonds are feeling it even worse down 83 bps. Once the bonds started slipping, the selling picked up steam and we fell off a cliff. Stronger than expected ADP number today didn’t help. Neither did Chairman Powell’s comments to Congress. We have more news and data tomorrow and then Friday we have the jobs report. Between the continuing crisis in Ukraine (even when it is over, the crisis will continue. Maybe not militarily but certainly humanitarianly as the infrastructure i.e. hospitals, schools businesses, supplies, has been decimated), inflation, Fed rate hike, etc.. volatility is going to be high for some time to come. I do not believe the stock market has found bottom and do believe bonds will rally further but it will be bouncy.
Dr. Elliott Eisenberg shared some sobering information last night. In 2/20, pre-Covid-19, real per capita personal income was $45,453. It then bounced wildly due to repeated stimulus checks and other expansionary fiscal policies peaking at $57,597 in 3/21. It’s since declined every month but one and is now $46,018, $565 above the 2/20 level. The pre-Covid-19 trend would now have it at $47,000. Absent the substantial savings accumulated during Covid-19, the rate of personal spending growth would be anemic.
Please remain safe and healthy, make today great.
