Weekly summary
The following summary points are taken from the regular start-of-week update circulated to investment teams.
• Record surge in US M1 and M2 over last four weeks
• Global six-month real narrow money growth = 2.4% in February, likely to rise to 4%+ in March
• Ignore economic stats – we know they’ll be awful + there are huge measurement issues + they won’t give any leading indicator signal for an activity bottom and recovery, which depend on an easing of lockdown restrictions
• The lockdowns are working – daily new cases peaked over a week ago in most European countries
• The counterpart of a record monetary surge is a record fast rise in unemployment - but this suggests an early peak and markets anticipate turning points
• Fed liquidity injections have dwarfed those elsewhere and may succeed in reversing USD strength
• Chinese manufacturing PMI new orders rebounded to c.50 in March, two months after lockdown – why shouldn’t global new orders do the same in May / June?
Reader Comments (2)
What about velocity of US money? Still not understanding what is happening exactly given the banking system is essentially closed.
How do countries end lock-downs without cases spiking again?
Agree re PMI of course diffusion indices are worse than useless for this kind of event. If production goes down to 10% across the board, when it rebounds to 20, PMI will go over 50.
I have got a question that is booming my head.
You always focus in Growth of M2 and M1 and son on.
but my question is: Do velocity of money affects the prospects here?, I mean: even tough money grows, it could be stagnat in a pool of hoarding, up to the point when we lift the restrictions?
Thanks in advance from a novice.