The problem with most analysis out there is the projections are based on mega-credit cycle comparisons. Our Post-Apocalyptic literature theme this week was intended to break that faulty thought line. The pedestrian correlations that are being drawn between asset markets and the "dollar" miss the actual driver - Real Rates. Real rates turned negative before the first half slowdown became obvious. They turned deeply negative as the "transitory" nature attenuated. Post-apocalyptic credit cycles are characterized by rates/growth correlation. Note what comes first stock geeks. Equities dance to the note market's tune. After a monetized credit crash, equities are not a leading indicator of anything.
The ISMs will remain a decent proxy for forcing flawed historical comparisons onto ash heap. Our focus on the 5 year stems from this growth connection. Nominal 5 year yields remain one of the best indicators of forward growth trends. Take a gander at 5 year yields and GDP estimates since December (we make a small QE fudge factor that is now obviously diminished). We follow 2 rules for the second half of 2011: 1) Don't believe the hype. 2) Don't trust any analysis that is based on steroid raged credit cycle comparisons..