BC data Before Coronavirus
Before the Coronavirus, the economic data was outstanding. It had the longest economic and job expansion ever recorded in history. We just came off 7,000,0000 job openings, and the most recent jobs data on a 3-month average was running at 243,000 per month on the best 3-month average prints in the past few years.
Now, we have an enemy in this world that is causing havoc and chaos. We are in the AD stage of the economy AD After The Disease regarding the data.
Back on February 3rd, I wrote the Chaos Theory and The Butterfly Effect regarding the Coronavirus. We can see the chaos now in jobless claims data, which got to 3,280,000.
In chaos theory, the butterfly effect refers to the idea that due to the interconnectedness of all things, a small event can result in significant effects on a nonlinear, dynamic system.
The butterfly effect gets its name from the metaphor that even small swirls of air caused by the flapping of a butterfly’s wings can change the path of a tornado, also though the system is far removed in space and time from the first event.
In many ways, we see this theory manifest in the U.S. bond and stock market – a dynamic system that is prone to the influences of distant perturbations.
Case in point, a virus outbreak among an urban population of a distant country may lead to a lower rate of growth in the economy in 2020. But it could also lead to a lower 10-year yield and thus lower mortgage rates for the housing market.
From Boeing to Brexit: 7 major storylines that could send mortgage rates even lower
Make no mistake this is WWIII vs. this pandemic virus that needed economic shutdown protocols. We are going to crush this virus, we are going to open the economy at the right time, and we are going be back in business. However, we have a lot more work to do.
Look for May 18th to be a suitable date for us to have better data vs. the Virus new case rate of growth; Hopefully, earlier as testing capacity is growing! Then on September 1st, we will, in general, be in a much better spot against this virus and more ready for any 2nd wave.
Just a reminder, we have now over 25 trillion in debt (New disaster relief package included) and heading a lot higher and yet the bond market (10-year yield is at 0.79%). One thing I hope we have learned in this horrific event. We were never out of ammo to help the economy.
These charts speak for themselves; the velocity of economic damage that a virus can do to an economy is unbelievable.
From Doug Short:
Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data daily on his Facebook page https://www.facebook.com/Logan.Mohtashami and is a contributor for HousingWire.