This thread is about what is, and what the current policies are leading to. Not what should be.
The world set a new daily record yesterday.
2/6
Leading this record is the parabolic spike by Europe.
7-day quarantines are mandatory for positive cases.
3/6
And leading Europe to new records is the UK, Italy and Spain.
4/6
Many pointing to South Africa peaking. Remember this was after a 100x increase in 30 days. Maybe they hit testing limits after this massive rise? Consider:
The last two days SA cases are heading up again.
The rest of Africa is going vertical and also setting new records.
5/6
Asia, and especially China, has zero COVID, one case and everything closes.
Xi'an, a city of 13 million (>than NYC) is closed, because of 127 cases over one week!
6/6
Positive tests
US 10-day quarantine
Euro 7-days quarantine
Asia, zero policy (lockdowns!)
You think the global supply chain is "challenged" now, let's remove billions and billions of workdays from global production in the coming weeks and see what happens to it?
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ISM was released this morning, marking the first monthly data point since Liberation Day.
It beat expectations and is not giving indications that manufacturers "froze" or "hit a wall" post Liberation Day.
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*US APRIL ISM MANUFACTURING INDEX FALLS TO 48.7; EST. 47.9
2/9
It is consistent with decent NON-TARIFF growth.
3/9
Why did bonds not like it (yields moved higher)? Maybe prices paid (tariffs?)
Yesterday, I made the case that tariff-driven inflation expectations are soaring, driving the bond market, and paralyzing the Fed from cutting despite fears of a recession.
Last week, the 30-year yield rose 46 basis points last week to end at 4.87%.
As this chart shows, this was its biggest weekly rise since April 1987 (38 years ago!).
2/16
Why Did This Happen?
Let's start with what it was not. It was not data that suggested the economy was strong or recent inflation was high.
Here is a tick chart of the last 3-days of the 10-year yield.
3/16
The better-than-expected CPI and PPI reports (green) had no impact on the 10-year yield.
The worst-than-expected Michigan Survey (red), with its collapse in sentiment implying a severe slowdown or recession, did nothing to stop the drive in yields to the highs of the day.
How stressed are markets? By this metric, the most in 17 years.
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SPY = The S&P 500 Index Trust. This was the first ETF created in 1993 and is one of the largest at $575 billion.
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The middle panel is SPY's Net Asset Value (NAV). The price closed at a 90-basis-point premium to the underlying value of the assets.
The last time anything like this happened was 2008. To emphasize, not even in the crazy days of 2020 did its divergence get this big.
2/4
VOO = Vanguard S&P 500, $566 billion in assets
At the same time VOO, which is Vanguard's version of SPY, went out at one of its biggest discounts in years (middle panel).
3/4
Finally, IVV iShares Core S&P 500 ETF, $559 billion in assets
It has been trading at a persistent discount for a few weeks (middle panel).