Gold Royalty Companies Report A Solid First Quarter On Higher Metal Prices

Frank Holmes on Bloomberg March 2020

A month is all it took to wipe out a decade of jobs growth.

U.S. employers cut an unprecedented 20.5 million jobs in April, the most in history, while the unemployment rate rocketed up to 14.7 percent. As of last week, a head-spinning 33.5 million Americans, or one out of every five workers in the U.S. labor force, have lost their jobs as a result of coronavirus lockdown measures.

With so many people out of work as we head into the second quarter, the next earnings season for S&P 500 companies is undoubtedly going to be one for the history books. FactSet reports that Wall Street analysts have already cut their second-quarter earnings estimates by 28.4 percent, the largest such decline on record.

Meanwhile, we’re seeing corporations file for bankruptcy protection at an accelerated clip. As of May 7, an estimated 78 public and private firms with liabilities greater than $50 million have declared bankruptcy so far in 2020, including iconic brands J.Crew and Neiman Marcus. This puts businesses on track to meet and even surpass the 271 bankruptcies that occurred in 2009.

Negative Rates in the U.S.?

Against this backdrop, yields on the two-year and five-year Treasury fell to fresh record lows on Friday as the fed funds futures market continues to price in negative interest rates by early 2021.

(Click on image to enlarge)

 

Yield on the Two-Year Treasury at a New Record Low

 

If you recall, Alan Greenspan himself, former Federal Reserve chairman, said it was “only a matter of time” before negative rates spread to the U.S. That was back in September.

Greenspan’s prediction may well come true sooner than even he expected. With the two-year Treasury yield dipping to an anemic 10 basis points, the next test is 0 percent (or less!).

And remember, this is the nominal yield. Adjusted for inflation, it’s already turned negative.

Record Inflows Into Gold-Backed ETFs

To be clear, I’m not advocating for or in favor of negative U.S. rates. As others have pointed out, subzero rates don’t guarantee economic recovery. They don’t appear to have helped the Japanese or European economies in any way. Instead, they only seem to punish people with savings accounts, forcing them to spend their money or else see their balances slowly melt away.

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Disclaimer: 

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. A basis point, or bp, is a common unit of measure ...

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