A partial digest:
Quick wrap for the week ending May 28:
Yields finished slightly down after a volatile week.
The DXY was flat.
CALL: No change; near to semi-intermediate term, prices could rise further given supply shocks, OPEC+ micromanagement, inflation expectations, "recovery," and more fiscal spending, among other things. Longer term, it's a dying industry.
[tracking: XLE, GGN]
The S&P Global Clean Energy index finished up for the week.
Gold breached $1,900 before finishing below that level.
CALL: In the very near term, it must be acknowledged that gold has the uncertain potential to rise further as traders who call the competence of the Fed and US Treasury into question drive prices higher. Beyond the very near term, however, no change; the expectation remains for ever-lower valuations moving forward. Looking for an eventual floor around $1,200/oz.
[tracking: JDST, GGN, GDX, GLD, SLV, ZSL]
Commodities finished up for the week.
The St. Louis Fed Financial Stress Index (STLFSI2) for the week ending May 27 ticked up to -0.8527 from -0.8694 the week prior. It remains well below zero, or the stress the economy experiences under “normal financial market conditions.”
Total crypto market cap was 1.50 trillion as of May 28, meaning inflows of about $130 billion since last reading.
Flows for the week ending May 26, per Refinitiv Lipper data:1
Global money market funds witnessed much higher inflows of $53.2 billion.
Global bond funds realized inflows of $8.25 billion.
Global equities saw increased inflows of $8.84 billion.
US money markets saw much larger inflows of $66.6 billion.
US bond funds realized inflows of $4.82 billion.
US equities saw inflows of $5.06 billion, reversing course from the previous week. Tech attracted $546 million, while value raked in $2.4 billion.
US inflation protected bonds witnessed inflows of $641 million.
Asian market equities saw inflows of $1 billion.
Eurozone equities saw inflows of $2.47 billion.
Emerging market stocks realized smaller outflows of $463 million, with EM bonds witnessing inflows of $420 million.
Precious metals saw a jump in inflows to $1.37 billion, as momentum investors chased returns.
Initial jobless claims in the US for the week ending May 22 declined to 406k (SA) from 444k for the week prior. One year ago, we saw 1.887 million. We are now in the one year ago timeframe where the US has been square in the grips of the pandemic. The four week moving average decreased to under 459k.
To add to this, just over 93.5k on an unadjusted basis applied for PUA, down from the previous week’s 95k+.
As of May 8, over 15.8 million people (UA) were still claiming unemployment benefits of some kind, down over 175k from the week prior. In the comparable week one year ago, the US witnessed nearly 31.579 million people claiming unemployment insurance from all programs together.
The PEUC UI benefits program saw the biggest increase (49k+) from the previous week.
These numbers are still cause for concern, although we have now dropped and remain below last year’s number of total continued claims for the comparable week.
Mortgage applications fell a blended 4.2% (SA) for the week ending May 21, due to a decrease of 7% in refis overshadowing an increase of 2% in homebuyer applications. ARM activity rose slightly to 4% of all applications from 3.9% the week prior.
MBA’s choice for a 30Y fixed benchmark rose several basis points to 3.18%. The simple national average as reported by Freddie Mac (via FRED) for May 27 fell to 2.95% on the 30Y fixed, down five basis points from that reported the previous week.
At the same time, the forbearance rate as of May 16 fell slightly to 4.19% as more households made their exit in one way or another. Exits, the good, the bad, and the ugly, slowed some as we marked roughly 14 months of being beset by the pandemic in the US.
The share of households that exited with loan deferrals or partial claims increased, as did the portion exiting with loan/trial loan modifications and the segment re-entering mortgage forbearance. At the same time, the group that continues to make their monthly payments during their forbearance period fell again.
MBA estimates that 2.1 million households remain in a state of mortgage forbearance.
Elsewhere in the housing market, the ratio of home prices to rent has eclipsed the previous peak realized in January 2006, or the apex of the ‘08 crisis. To economist William R. Emmons with the St. Louis Fed, “this suggests the average house now sells for quite a bit more than its ‘fair value.’”2
CALL: On hold. The
of megalandlords increasingly making Americans perpetual renters rather than owners of property complicates the housing market picture. That said, Bloomberg is joining the chorus of voices that believe that the housing market may be in for a
for various reasons, not the least of which are costs.
[tracking: DRV, XLRE, SPG, VNO, WPG, NLY]
Used car trends: The latest Carvana car count as of the time of writing fell 4.62% to 41,823 vehicles from 43,847 the week prior. The four-week moving average came in at 40,291. Meanwhile, the CarGurus average price index continued rising, this time by 2.10% to $26,189 from $25,650. This is a new high for the index since said data collection began for this newsletter in November of last year.
India continues to lose thousands/day to COVID-19.
The current state of equity: Media mogul takes on McDonald’s amidst Black-owned business devastation.
During the pandemic alone, the US has now witnessed 225,400 fatalities strictly classified as “pneumonia” with no attribution to COVID-19 on the death certificates, per CDC excess deaths data. This equates to an average of 435 people per day since the start of 2020. As the CDC points out, many of these could be miscategorized COVID-19 fatalities going unrecognized in official tallies, meaning we’re undercounting. This, in addition to the official coronavirus death toll of 595,211, puts the probable COVID-19 death figure somewhere north of 715k.
Across all causes of death, we suffered 119% of the deaths in 2020 that we would have expected in non-pandemic times given historical trends. Along with other situations where COVID-19 was not designated as a cause of death but where SARS-CoV-2 likely triggered a condition or exacerbated a preexisting one—heart disease, hypertension, diabetes, dementia—the “real” fatality count is probably much higher.3
When the average of “pneumonia” deaths per day begins to decline significantly and consistently, perhaps we'll be able to start saying that we might be gaining the upper hand on SARS-CoV-2. We’re not there yet.
NPR reported as of the time of writing that 40.7% of the population was fully vaccinated, up from 38.1% at last reading here.
India variants continue to spread within the US and elsewhere.
Emmons, William R. “House Prices Exceed Bubble Peak on Key Valuation.” St. Louis Fed (May 24, 2021).
Valenta, Philip. “Death by COVID-19 Hides in Plain Sight.” HedgeHound (June 29, 2020). The research includes the methodology behind the figures presented here every week, as well as information on historical pneumonia trends and death categorization in the US during the global pandemic. It was last updated on December 4, 2020.