What a different four weeks makes.
Four weeks ago, the S&P 500 had just taken out critical support. Everyone was panicking that the market was about to implode.
1. At that time, China was continuing to devalue the Yuan as its economy collapsed.
2. Europe was tumbling based on Draghi’s inability to generate inflation.
3. The US economy was rolling over sharply as deflation arose courtesy of US Dollar strength and a Fed rate hike.
From the narrative-destroying 49.8 preliminary print for US Services PMI (the lowest since the government shutdown in 2013), today's final February Services PMI printed an even worse 49.7 (below 50.0 expectations) even as stocks have soared in the last 2 weeks. Business confidence tumbles to its lowest since Aug 2010 (record lows). This drops the composite PMI to a dismal 50.0, implying negative GDP growth in Q1.
Less than 24 hours ago we presented the latest reason by JPM's Mislav Matejka explaining why the equity strategist refuses to buy this market, to wit: "equities are down ytd, but notably the ’16 P/E is not much cheaper today than it was at the start of the year. In fact, for the US, the P/E multiple is currently higher than it was on 1st January, at 16.8x vs 16.6x then."
One month ago, when looking at the latest Canadian official international reserves, we noticed something strange: Canada had sold nearly half of its gold reserves in one month. According to the February data, total Canadian gold reserves stood at 1.7 tonnes. That was just 0.1 per cent of the country’s total reserves, which also include foreign currency deposits and bonds.
As we noted, the decision to sell came from Finance Minister Bill Morneau’s office.
While revised modestly higher from preliminary levels, US non-farm productivity plunged 2.2% in Q4 2015 - the biggest drop since Q1 2014.
Economists are gnashing their teeth to explain this "plunging productivity paradox" - we think it is rather simple...
While only modestly tongue in cheek, here is what is really going on...