Let’s start this Terrific Thursday,
3,169 MILLION new people file for unemployment, bringing the total in excess 33.5 mm. Can anyone fathom that number? Imagine for a moment that everyone in… New York City, Los Angeles, Chicago Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas, San Jose, Boston, San Francisco Denver, Seattle, and Las Vegas was out of work. Does that give any better context? As incredible as that is, the markets reaction is equally stunning. We are in the deepest recession of all time (ALL TIME) and the equity markets are up almost every day. The Nasdaq has thundered back from the March sell-off and is now positive for the year. Today alone the Dow is up 400 points. Commentators are claiming this is a FOMO trade driving equities higher. If anyone has an another explanation for this, well, uncharacteristic, behavior please share it. I am at a loss for words at this time. Greed makes people do strange things. One blog I read remarked on a comment Warren Buffet is famous for: “be fearful when others are greedy and greedy when others are fearful.” Bond traders are the smarter guys in the room and they typically get it right. With that, the 10-yr is at .65% and mortgage bonds are +20bps. I expect, unless the government steps in and now supports lost revenues (which seems impossible and insane) in addition to supporting employee retention, there will be an accounting (reset) in the equity markets (more in the Dow and S&P, less in the tech heavy Nasdaq). I could certainly be wrong and may miss out on some substantial gains, but I also won’t take on losses. I am not planning to be long any equities until we see real direction. Once trading becomes more normalized, I see interest rates into the 2’s.
Tomorrow is D-day for the economy when the BLS jobs report comes out. Markets are expecting the unemployment rate to come in at 14%. I expect it to be closer to 18% and won’t be surprised if it is north of 20%. Maybe that will be the wake-up call for equities, we will see.
Buckle up buttercup, its gonna be a wild ride.
Please remain safe and stay healthy,
Make today great!