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?
