Trying To Understand ‘Exactly What’s Happening’

From The Guardian: 

With his deserted cityscapes and isolated figures, Edward Hopper captured the loneliness and alienation of modern life. But the pandemic has given his work a terrifying new significance.

“We are all Edward Hopper paintings now,” according to a WhatsApp compilation of Hopper scenes: a woman alone in a deserted cinema, a man bereft in his modern apartment, a lonely shop worker and people sitting far apart at tables for one in a diner. As is the way with memes, it’s hard to tell if this is a serious comment or a glib joke with a side order of self-pity.

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Economic activity is “leveling off” in some parts of the US hit by a resurgence of COVID-19, Atlanta Fed boss Raphael Bostic told the Financial Times, in an interview.

“There are a couple of things that we are seeing and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise”, Bostic said, striking a decidedly cautious tone. “So we’re watching this very closely, trying to understand exactly what’s happening”.

So are markets. Everyone is doing precisely what Bostic is doing. That is: “Watching this very closely, trying to understand exactly what’s happening”.

Just about the only thing we can say for sure is that US cases are rising. And so are stocks.

At this juncture, there’s not enough in the way of evidence that rising infections will entail sweeping new lockdowns to compel traders to fade what has turned into a kind of slow-motion, melt-up with intermittent bouts of euphoria (e.g., Monday) and panic (e.g., June 11).

“We’re being fed a diet of data that tells us nothing about the risk of virus revival and economic caution in the months ahead”, SocGen’s Kit Juckes lamented on Tuesday.

All of the data (save perhaps jobless claims) is to some extent stale. A lot of it is expired. Most of it is meaningless.

Does it matter, for example, whether German industrial production rose 7.8% in May instead of the 11% economists were looking for? For some traders and journalists, desperate to rationalize something or other, it mattered on Tuesday. But that’s ridiculous. German IP figures were worth watching in 2019 when market participants were keen to get a read on when (or if) the country’s manufacturing slump would finally abate, but it hardly makes a difference now. Output was crushed in April, and it rebounded in May because there was nowhere else to go but up. Who cares whether the print “beat” or “missed” when everyone making estimates is flying totally blind?

“Since the onset of the pandemic it has been challenging for investors to parse through the details and implications from the spread of the novel coronavirus; a dynamic which doesn’t appear to be improving with time and practice”, BMO’s Ian Lyngen and Jon Hill remarked.

News that Melbourne is set to be locked down for six weeks underscores the notion that second wave fears aren’t just a US phenomenon. And let’s face it — it doesn’t make any sense to use the term “second wave” in the US. The country clearly never escaped the first wave.

For his part, Bostic has voiced concerns about permanent damage to the economy since the onset of the crisis. That’s still his “biggest concern”, he told the FT.

“To what extent are business losses permanent, are job losses permanent?”, he wondered.

If the June jobs report is any indication, the situation is troubling. Permanent job losses surged last month, and the three-month tally is disconcerting indeed.

If you ask Jefferies, the US economy has, in fact, “flatlined”.

“The loss of momentum is broad-based, spanning small business activity, discretionary footfall, restaurant bookings, traffic congestion and web traffic to state unemployment portals”, the bank said, in a Monday note. That echoes Goldman’s message, as spelled out Saturday.

Prior to the latest flare-ups, things had largely returned to some semblance of normality on a global, aggregate scale.

“The overarching issue remains one of uncertainty — in terms of the ultimate infection rate, pace of infections, and the permanent changes in consumption patterns which result”, BMO reiterated Tuesday, adding that “these unknowns will linger in the market for the foreseeable future and, as such, we suspect only serve to further reinforce the ongoing divergence in asset class performance which has resulted in one of the most criticized stock market rallies in memory”.

It seems like every stock rally in recent memory has been “criticized” for one reason or another. Every rally is “the most hated in history”, according to journalists.

There’s some truth in it, though. The flows picture for 2020 certainly doesn’t back up the contention that investors are falling all over themselves to get in on the action (see the generational divide discussion in “Speculative Mania Or ‘Unprecedented Bearishness’? The Strange Case Of The US Retail Investor“).

If there’s consensus around anything, it appears to be that the world has changed.

Or, maybe that’s not accurate. Maybe certain trends have just been reinforced to such a dramatic extent that it feels like change. As UBS wealth management told clients on Monday, “the post-COVID-19 world will be more indebted, less global, and more digital”.

Whatever the case, the accompanying feelings of isolation, strangeness, and dread will be all too familiar.

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From The New Yorker

In certain pictures of rural dwellings by Hopper, woods (like those in “Cape Cod Morning”) or topographical formations subtly menace a human intrusion. But in Hitchcock’s work, and in Hopper’s, especially, the unnerving relation of the far to the near is often reversed, and what’s mysterious, if not sinister, becomes identical with our point of view. What are we doing here, seeing that? Voyeurism–the saddest excitement–may be suggested.

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