OECD: Worst Global Recession in Nearly 100 Years

The OECD reports that global economic output will fall by 7.6% if another wave of coronavirus arrives in 2020, by 6% if not.  US GDP will fall 8.5% if a second wave occurs, and 7.3% if a second wave is avoided. If Dr. Fauci is right, a second wave is likely. I’m almost certain of it.

Also out this morning, US CPI – which came in roughly in line with consensus and registered the third monthly drop in a row.

CPI fell 0.1% in May versus the 0.8% drop in April – the biggest since the GFC. YoY, CPI inched up 0.1% versus April’s 0.3% gain.

Core CPI, which excludes food and energy, also fell 0.1% following a 0.4% drop in April. Annually, core CPI rose 1.2% in May – the smallest rise since 2011.
But, the big news today will be the Fed.  Will they or won’t they expand the massive stimulus seen over the past two months? Inflation is low and unemployment is high – both cause for additional stimulus under normal circumstances.
But, the FOMC certainly realizes they have reinflated markets beyond what the economic circumstances would dictate – zombie companies and all. The disconnect is so stark that even permabulls are attributing new all-time highs to the Fed’s actions.
There are many, but one of my favorite frothiness indicators is Citadel’s report that Russell 2000 stocks priced under $1 (penny stocks) are up 79% in the past five trading days. Nothing weird about that, right?  Wouldn’t it be cool if one of the reporters covering Powell’s press conference asked him about market integrity and equity bubbles?
Nothing much new in the futures. We still have the .886 just overhead, with OPEX on the 19th and Q2 closing out on the 30th.  Both are typically bullish.  But, the downside potential is significant.
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