Will US home prices decline over the next year?

The Daily Shot: 05-Aug-20
The United States
Canada
The United Kingdom
The Eurozone
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
High-frequency indicators point to accelerating home price appreciation in recent weeks.
 
Source: AEI Housing Center  
 
Record low interest rates have made home affordability the best it’s been in four years.
 
Source: Black Knight  
 
Here is the last time housing was this affordable, by state.
 
Source: Black Knight  
 
However, CoreLogic expects home prices to be below current levels next summer.
 
Source: CoreLogic  
 
Weak consumer confidence could weigh on housing-related inflation going forward.
 
Source: BofA Merrill Lynch Global Research  

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2. Next, we have some updates on the labor market.
 
July is usually a slow month for payrolls.
 
Source: CIBC Capital Markets  
 
This chart shows unemployment income replacement rates by occupation.
 
Source: Scotiabank Economics  
 
The Paychex/Markit small business employment index fell to new lows last month.
 
Source: Paychex | IHS Markit Small Business Employment Watch   Read full article  
 
However, weekly hours improved further.
 
Source: Paychex | IHS Markit Small Business Employment Watch   Read full article  

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3. Credit card delinquencies have been relatively low in recent months.
 
Source: @WSJ   Read full article  
 
Credit/debit card spending has been flat since mid-June and remains more than 10% below last year’s levels.
 
Source: JP Morgan, @jessefelder   Read full article  

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4. Factory orders rose sharply in June, boosted by automobile demand (2nd chart).
 

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5. Manufacturers think that customers’ inventories are too low, which could support factory activity in the months ahead.
 
Source: @RenMacLLC  
 
6. Planned capital expenditures are starting to recover.
 
Source: Morgan Stanley Research  
 
7. Goldman’s current activity indicator (CAI) declined last month.
 
Source: Goldman Sachs  
 
8. Unlike the worst quarter of the 2007-09 recession, last quarter’s GDP decline was driven primarily by the unprecedented drop in demand for services, according to Bain.
 
Source: Bain & Company  
 
9. E-commerce sales have risen well above trend.
 
Source: BofA Merrill Lynch Global Research  
 
10. US foreign trade remains depressed.
 
Source: @GregDaco  


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Canada

1. The Canadian dollar has rebounded to pre-crisis levels.
 

 
The rally was driven by US dollar weakness and the rebound in crude oil.
 
Source: CIBC Capital Markets  

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2. Consumer confidence is recovering.
 

 
3. The manufacturing sector swang into growth last month.
 


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The United Kingdom

1. Loan loss provisions spiked this year.
 
Source: @markets   Read full article  
 
2. This chart shows the proportion of employees who have lost work (by age group).
 
Source: Resolution Foundation   Read full article  


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The Eurozone

1. Spain’s unemployment unexpectedly decreased last month.
 

 
2. The fiscal situation in France has been deteriorating.
 
Source: Pantheon Macroeconomics  
 
3. Italy’s 30yr bond yield is nearing record lows.
 

 
4. Germany has provided the most aid to firms compared to other European countries.
 
Source: Pavilion Global Markets  
 
5. The euro-area effective retirement age has been rising this century.
 
Source: ECB   Read full article  


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Asia – Pacific

1. Japan’s service sector is still in contraction mode (PMI < 50).
 

 
2. Singapore’s business activity (manufacturing & services) is yet to stabilize.
 
Source: IHS Markit   Read full article  
 
3. The inverse correlation between Asian shares and the US dollar is near multi-year highs.
 
h/t Moxy Ying  
 
4. Next, we have some updates on Australia.
 
Service sector activity is expanding at the fastest pace in years.
 

 
Online searches for “unemployment” are moderating.
 
Source: Goldman Sachs  
 
Construction is still weakening but at a slower pace.
 

 
Mortgage financing for owner-occupied housing rebounded sharply in June.
 

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5. Finally, here is a look at New Zealand’s employment report.
 
The labor market remained resilient in Q2, helped by government support.
 

 
Remarkably, the unemployment rate declined (economists expected a sharp increase).
 

 
However, hours worked plummetted.
 
Source: Goldman Sachs  
 
Labor force participation fell.
 

 
Labor costs grew at the slowest pace in years.
 

 
The Kiwi dollar jumped in response to the surprisingly strong employment figures.
 


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China

1. The renminbi continues to advance against the dollar (although it has weakened against a basket of currencies – #2 here)
 

 
Widening rate differentials with the US are supporting China’s currency.
 

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2. The services PMI unexpectedly declined last month but remains in growth mode.
 

 
3. China was the world’s third-largest source of foreign investment during the 2016-19 period, according to ANZ.
 
Source: ANZ Research  


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Emerging Markets

1. Let’s begin with LatAm vehicle sales in July.
 
Chile:
 

 
Mexico:
 

 
Brazil:
 

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2. Next, we have some additional updates on Brazil.
 
Industrial production (strong rebound):
 

 
Electricity consumption:
 
Source: Morgan Stanley Research  
 
Workplace-visits relative to other LatAm economies:
 
Source: ING  

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3. It seems that Argentina has reached a deal on debt restructuring.
 
Source: @WSJ   Read full article  
 
Bond prices climbed.
 

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4. Indonesia’s GDP declined more than expected last quarter.
 

 
5. Here are some updates on India.
 
Top-rated firms have access to debt financing at record-low rates.
 
h/t Rahul Satija  
 
RBI’s aggressive rate cuts have not resulted in stronger bank lending.
 
Source: ING  
 
Private equity deal count is rising in India, outpacing both the US and China.
 
Source: DeepMacro  

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6. Turkey’s funding markets are under stress, with the overnight borrowing costs soaring.
 
Source: @IceCapGlobal  
 
Sovereign credit default swap spreads are elevated relative to other EM economies.
 
Source: @NancyRLazar1  
 
And the stock market has rolled over.
 

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7. EM dollar-denominated bond yields are at multi-year lows.
 
Source: @ISABELNET_SA, @MorganStanley  
 
8. EM fund flows have recovered.
 
Source: Goldman Sachs  


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Commodities

1. Let’s begin with precious metals.
 
Gold blasted past $2k.
 

 
ETF holdings of gold now exceed Germany’s gold reserves.
 
Source: @markets   Read full article  
 
BofA clients are increasing their holdings of precious metals ETFs.
 
Source: BofA Merrill Lynch Global Research  

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2. Corn prices in China have been climbing.
 
Source: @WSJ   Read full article  
 
But that’s not the case in the US – despite higher purchases from China (2nd chart).
 

Source: @WSJ   Read full article  
 
This chart shows the amount of US corn and soybeans sold.
 
Source: @ReutersCommods, @kannbwx   Read full article  
 
The US-China deal review is coming up.
 
Source: Reuters   Read full article  


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Energy

1. Brent is at resistance.
 

 
2. China’s purchases of US energy products have been well below target.
 
Source: Reuters   Read full article  
 
Here is the distribution of US energy products sold to China.
 
Source: Reuters   Read full article  


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Equities

1. Volatility could rise sharply this year.
 
Source: MarketDesk Research  
 
2. The Nasdaq put/call ratio shows risk appetite at extreme levels.
 
Source: @RunItTwice2  
 
3. Directing order flow from retail investors has been very profitable this year.
 
Source: @jessefelder   Read full article  
 
4. E*TRADE customers sharply reduced their exposure to real estate and consumer staples last month.
 
Source: E*TRADE Financial Corporation  
 
5. The amount of SPAC capital raised this year has been impressive.
 
Source: Goldman Sachs, @tracyalloway  
 
6. Apple’s weight in the S&P 500 is a record for single-stock concentration.
 
Source: @StrategasRP  
 
7. Passive ETFs continue to enjoy massive inflows. That’s not the case for passive mutual funds.
 
Source: @DaveNadig, @EricBalchunas  
 
8. There have been quite a few ETN liquidations this year.
 
Source: Bloomberg Law   Read full article  
 
9. Here is the average performance of a stock after a share split.
 
Source: @StrategasRP  


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Credit

1. European M&A-related high-yield issuance has picked up.
 
Source: @WSJ   Read full article  
 
2. Credit inflows have been robust.
 
Source: BofA Merrill Lynch Global Research  
 
3. Tightening credit standards at banks point to much higher defaults for high-yield debt.
 
Source: Deutsche Bank Research  
 
4. Retailmageddon has accelerated this year.
 
Source: @lisaabramowicz1, @joshfromalaska, @theterminal  


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Rates

1. Treasury yields keep drifting lower.
 
Source: @TheTerminal  
 
The trading range has been tightening.
 

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2. TIPS yields (effective real rates) continue to tumble.
 
Source: @Not_Jim_Cramer  
 
3. This chart compares the 2020 Fed currency swap balances with the levels we saw after the financial crisis.
 
Source: @WSJ   Read full article  
 
4. So far, neither repo nor effective fed funds rates show any liquidity tightness in money markets.
 
Source: Pavilion Global Markets  


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Global Developments

1. Close to 70% of restaurants globally have reopened, according to OpenTable.
 
Source: Morgan Stanley Research  
 
2. This chart shows the changes in property sales this year.
 
Source: Fitch Ratings  
 
3. Online search activity for commercial real estate has leveled off.
 
Source: Arbor Research & Trading  
 
4. Global manufacturing returned to growth in July.
 
Source: World Economics   Read full article  
Source: @JeffreyKleintop  


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Food for Thought

1. Reopening plans at US colleges:
 
Source: Statista  
 
2. MLB TV ratings relative to last season:
 
Source: @WSJ   Read full article  
 
3. Comfort levels with various activities for Millennials and baby boomers:
 
Source: Morning Consult   Read full article  
 
4. US crime statistics for 2020 relative to previous years:
 
Source: The Economist   Read full article  
 
5. Flexible options for employees:
 
Source: @WSJ   Read full article  
 
6. Views on the Confederate flag:
 
Source: Morning Consult   Read full article  
 
7. The 2020 decline in CO2 emissions in perspective:
 
Source: ECB   Read full article  
 
8. US cannabis retail sales estimates:
 
Source: Marijuana Business Daily  
 
9. The most-Googled “why do” question in each state:
 
Source: Mental Floss   Read full article  

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