Macro Update

Once again I can keep the macro update relatively light on narrative and heavy on charts.

No big surprises this week, our overall net macro score didn’t change, although there were a couple of score changes among the components (per below).

Click each graph below to enlarge…

PWA Macro Index

Weekly Mortgage Apps actually added positively to our index, recapturing their old upward trend line:

Truck tonnage, on the other hand, cratered, offsetting the positive from mortgage apps:

Speaking of mortgages, other housing data this week isn’t helping the macro picture so much:

Housing permits:

Housing starts:

Jobless claims continue to come in at a historic pace:

Brick and mortar retail is abysmal (should see improvement in the coming weeks):

Consumer confidence states the obvious:

Rail traffic jibes with what we’re now seeing in trucking:

Caterpillar global sales also state the obvious:

Chemical Activity Index speaks to present manufacturing conditions:

Global Purchasing Manager’s Index revised even lower:

Now, for sure, by and large much of the data will begin improving notably over the coming weeks. And, for sure, there’ll be plenty of hype to go with it. And I suspect, given the nature of recent trading, we’ll see attendant bounces in the stock market. 

The question thoughtful investors will be asking themselves is not so much to what extent are we (via the data) bouncing off of previously unheard of lows, but what are the prospects for recapturing the pre-crisis trajectory anytime soon? — being that stocks are pretty much priced as if the economy’s already there. That’s what we’ll be addressing and managing portfolios around in the coming weeks/months.

In the meantime, we fully recognize, as we did months before we could even spell “coronavirus”, that the affliction (record levels of corporate debt, with a frighteningly large portion being low quality) that was virtually destined to make the next recession the worst in a century is still every bit as prevalent as it was coming in. In fact, per the following, perhaps more so.

Note how junk bond issuance aptly plunged in March, but then, alas, inaptly exploded in April (thanks to the Fed):

To what degree all of that new financing was utilized to stay alive vs to retire old debt remains to be seen. But the question you’re right now asking yourself — how is piling debt on top of debt ultimately going to get “us” out of this mess? — is a good one!

Much to consider as we manage through these unique times…

Speaking of debt, there’s of course the ultimate form that we’ll all be focusing on this weekend:

“Our debt to the heroic men and valiant women in the service of our country can never be repaid. They have earned our undying gratitude. America will never forget their sacrifices.”  –Harry Truman

Thanks for reading!


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