With every passing day, the bizarre freakshow that was once known as the “market” gets even more bizarre.
And we use the term “market” only in its loosest, legacy sense, one where it represented more than just the centrally-planned intentions of a few central bankers and politicians. Why? Because as BofA’s CIO Michael Hartnett reminds us in his latest Flow Show report, the disconnect between macro and markets has never been greater – i.e., they have never been more broken – but that is to be expected for the following three reasons:
Markets rationally being “irrational”: government and corporate bonds have been fixed (“nationalized”) by central banks, so why would anyone expect markets to connect with macro, why should credit & stocks price rationally. Markets leading macro: policy makers (see China this week) know higher asset prices necessary condition for macro recovery (Wall St assets are 5.6x size of US GDP)…
…V-shape recovery on Wall St leading V-shape recovery on Main St (see PMI’s & housing activity); gasoline demand good US mobility signal, up sharply to 9mn barrel/day from spring lows, watch to see if virus again negatively