Market Metrics Update

As the world economy seems to be moving beyond the “new normal” of massive central bank intervention, it is interesting to note the new market metrics: oil prices (higher is better), negative rates (over $8 trillion of global debt yields less than zero), dollar/yen ratio (a strengthening yen indicates a flight to quality, ie “risk off”), and the realization that US growth will be in the 1-2% range for the foreseeable future.  The IMF’s Christine Lagarde coined the phrase “the new mediocre” in October and it seems to fit.  Markets have rallied in the past few days on indications of cooperation among major oil producing countries to freeze production levels (although the glut is so large, a coordinated cut in production is necessary to raise prices).  The 10-year T is at 1.82% after dropping to below 1.60% in recent weeks.  Credit spreads: The corporate bond market showed signs of life after weeks of “frozen” debt issuance as top tier corporations; IBM, Toyota, Apple, etc issued over $23 billion in bond sales on Tuesday.  Several sub-investment grade companies are considering bond sales soon.  Hopefully this will auger a rally in credit spreads after months of widening.   Stay tuned.   David R. Pascale, Jr.