Commentary: Many global indicators are at inflection points
Long-term rates fell this week to the lows of 2013, mortgages stickier than 10-year T-notes. Although long Treasurys made it to 1.85 percent, mortgages are still 3.75 percent or so — the mortgage market frightened to death that any loan it buys today will live until its 360th payment.
Trading everywhere has ceased for Passover, Good Friday, and Easter, but next week brings a flood of brand-new information for March, capped on Friday by employment data. Thus a good time to reflect.
I do not recall a moment in which so many economic elements at the same time have been at points of inflection. In the old days (five years ago) nothing much mattered except U.S. data. In global markets the world is more important than the U.S.
1. Rates are down because of Europe. Period. Euro elites are secure looking down their noses: “Cyprus is unique, the euro-zone will be fine, just a little austerity and economic reform ahead.” Au contraire… bank funding costs in March everywhere except Germany rose by 25 percent (who wants a haircut at shoulder-level?); French and Spanish 10-year yields are opening versus German; nobody is making fiscal progress, the combination of austerity and euro-shackles making recovery impossible. Yet everyone who has cried euro-failure “Wolf!” has been premature. Or wrong: maybe there is no wolf at all. Or, if the wolf finally does arrive, the bigger the shock.
2. The stock market set a new high yesterday, greeted by no exuberance. Usually a technical “breakout” like this is followed by a big run. Not. This new high is a half-inch above the same top in 1999 and 2007. Whee. And yet … stocks could really run and bring back the wealth effect.
3. That wealth effect may already be here. This morning’s news: personal incomes jumped 1.1 percent in February and spending with them, up 0.6 percent.