- Was that the briefest recession ever? Jobless claims suggest the recession ended and recovery began in late April.
- In what is extremely unusual for a recession, personal income actually rose sharply (7.2%). Social income support policies more than offset declines in wages and salaries as employment fell.
- Consumer confidence about future economic conditions not only held up remarkably well, it has been rising over the last 2 months. This suggests consumers expect the economic impacts will be short-lived and are less likely to alter their behavior.
- Companies have largely also viewed the slowdown as likely to be short-lived. They have been planning for a recovery.
- Credit crunch or explosion? Corporate bond issuance is running at twice the pace of prior peaks.
- Credit not equities the bigger surprise. Credit spreads widened and tightened in lock step with equity prices. But this was despite: (1) a doubling in corporate bond issuance; and (2) credit indices weighting issuers by the amount of debt outstanding at a time when liquidity and leverage have been at the forefront of investor concerns.
- In contrast to prior recessions, which saw a move out of cash begin around market bottoms, this time the cash mountain continued to grow, up by $1.2 trillion since early March, even as risk assets have rallied for 10 weeks now. A move out of cash should be a positive for growth and risk assets.
- The global pandemic brought retail investors back into the equity market after being largely absent for a decade. They were important buyers of the correction in equities.
- Institutional investor positioning in equities by contrast remains extremely low (10th percentile). Positioning tends to be correlated with macro data and represents an upside risk as growth picks up.
- Visits to grocery and drug stores are back up to normal levels. Since these were not curtailed by lockdowns, this augurs well for a rebound in activity as lockdowns ease.
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