The Federal Reserve has been pumping liquidity (aka, air) since late 2008. And the stock market and commercial real estate prices have soared.
Pfizer seems to have a vaccine that works and United Airlines is scheduling more flights (not that I can fly anymore). And more good news …
(Bloomberg) — A closely watched measure of U.S. manufacturing jumped in June to the highest in more than a year, signaling the resumption of growth as pandemic-related lockdowns ended.
The Institute for Supply Management said Wednesday that its gauge jumped by 9.5 points, the most since August 1980, to 52.6 last month. Readings above 50 indicate that manufacturing is expanding, and the latest figure exceeded the 49.8 median projection of economists in a Bloomberg survey. More factories reported growth in orders and production.
The data mark a turnaround from just two months earlier when the factory gauge tumbled to an 11-year low as states closed most non-essential businesses to help contain the coronavirus. At the same time, the level of manufacturing activity, like much of the rest of economy, will probably remain below pre-pandemic levels for some time.
The US economy has gotten pummeled by the economic shutdown. The Atlanta Fed’s GDPNow measure of Q2 GDP is now at -45.5% with two weeks to go until the end of Q2. Note that The Federal Reserve has been expanding the M2 Money supply with a vengeance since the end of February.
M2 Velocity (Nominal GDP / M2 Money Supply) was at an all-time low at the end of Q1. The economic destruction caused by the Covid-19 related economic shutdown is epic.
On the positive side, the Philadelphia Fed is showing a V-shaped recovery.
On the down side, the trillions of monetary stimulus generated by The Fed has helped the S&P 500 index detach from corporate earnings. Or out of sync.
I could also say “Fauci’d”, thanks to our own Grim Reaper of the economy.
If you are watching panic at the Bank of Japan, European Central Bank, and Bank of England, you would think that the Spanish Flu from 1918 that killed between 17 and 100 million people was back.
While we watch the DJIA shed another 800 points in the first 30 minutes of trading, mortgage applications for last week skyrocketed as is there was no coronavirus.
Mortgage applications rose 55.43% from the preceding week. Refinancing applications rose 78.585 (NSA) while mortgage purchase applications rose 7.21%, far less than refinancing applications.
Here is a chart of refinancing applications as mortgage rates tumble.
Let’s see what happens with existing home sales in the next report.