Bernie Sanders finally creates value

SPX

Democratic Party hopeful Bernie Sanders announced overnight that he is dropping out of the presidential primaries. For the first time ever, his actions actually led to substantial wealth creation, sending the S&P500 up 3.4% on a $21 trillion market cap index.

All jokes aside, we thought markets have found a (short-term) bottom. S&P has reclaimed almost half of the peak since the corona-crash. We question the sustainability of this rally. At the moment the trend is our friend. We pointed out that the kitchen sink would be thrown and provide one last hurrah before the realities of businesses coping with a return to business played out.

As the lockdown continues, it is very hard to determine what the actual prints will be for large-scale macro-economic data and where that fits into expectations. We know that the Fed has already been out hosing the credit markets with promises of unlimited QE.

The housing market is already giving us hints. According to the Mortgage Bankers Association’s (MBA) Forbearance and Call Volume Survey, the total number of loans in forbearance grew from 0.25% to 2.66% from March 2 to April 1, 2020, with mortgages backed by Ginnie Mae seeing the largest growth (from 0.19% to 4.25%).

While not strictly an apples for apples comparison, the Delinquency Rate on Single-Family Residential Mortgages, Booked in Domestic Offices, Top 100 Banks Ranked by Assets peaked at 12.89% in 2010.

Plenty of trouble ahead. The market complacency is quite astonishing.

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