As I noted in the prior post, the commercial paper (CP) market is essentially a private debt market used by corporations to fund typical recurring operations and as such, should reflect general business conditions.
Likewise the S&P 500 index is accepted as a general measure of business activity.
As we know, the S&P 500 has been on a tear since March 2009 as “investors” have determined that current and future business conditions warrant a substantial increase in share price valuation.
But what is the commercial paper market telling us about general business conditions?
As I noted before, the latest CP outstanding shows the greatest year-over-year contraction on record providing a stark contrast to the movement seen for the more speculative S&P 500 index.
One of these measures is depicting the reality for general business conditions but giving the speculative nature of the stock market and the fundamental function of the commercial paper market, I suspect business activity is continuing to contract and that the CP market is the more realistic gauge.