I still think it’s absurd to say that the economy is “recovering” or that the recession has ended. While we’ve seen an incredible rebound in terms of mean reversion we’re not exactly “recovering” so much as we’re just keeping our head above water. In a recent note David Rosenberg highlighted just how unusual the current market environment is. The bond market is essentially calling for a horribly weak economy while the outlier events continue to pile-up during this “recovery”. The S&P 500 appears largely unmoved by much of this, however:
“The S&P 500 is locked in this technical battle between 1,000 and 1,200 but the bond market has already said enough is enough as the 10-year Treasury note yield remains stubbornly below 3%.
Moreover, consider the odds of seeing the following:
- It is a 1-in-20 event to see successive declines in durable goods shipments and orders.
- To see the CPI down for three months in a row is a 1-in-40 event. To see the PPI falling three months in row carries 1-in-25 odds. But to have both PPI and CPI fall three months in a row is … 1-in-85 event.
- As for retail sales, posting back-to-back declines during expansionary periods is a 1-of-35 event.
- As for the deflationary waves hitting the shores of the labour market, a decline in average hourly earnings, as we saw in last month’s payroll data, is a 1-in-50 event.”
Source: Gluskin Sheff