The vaccine-induced equity rotation accelerates

The Daily Shot: 17-Nov-20
Equities
Alternatives
Credit
Rates
Commodities
Energy
Cruptocurrency
Emerging Markets
China
Asia – Pacific
The Eurozone
Canada
The United States
Food for Thought


The vaccine-induced equity rotation accelerates


 

Equities

1. Moderna’s vaccine news sent the Dow to a new record as we approach 30k.
 
Source: The New York Times   Read full article  

 

 
Will we see the first two vaccines approved in December?
 
Source: Barclays Research  

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2. Let’s take a look at some sector dynamics.
 
The lockdown trade:
 


 
The reopening/reflation trade:
 
Banks:
 

 
Energy:
 

 
Energy and financials are attracting larger inflows.
 
Source: MarketDesk Research  
 
Industrials:
 

 
Transportation:
 


 
Here is the Dow Jones Marine Transport Index.
 
h/t Walter
 
Metals & Mining:
 

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3. The rotation has been out of large caps and growth into small caps and value (supported by higher Treasury yields).
 
Source: @ISABELNET_SA, @BofAML  
 
Out of …
 
Momentum:
 

 
Into …
 
Small caps:
 

 
Value:
 

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4. Stocks favored by retail investors are on fire.
 

 
And retail investors got more good news after the close.
 
Source: CNBC   Read full article  
 
Source: Google  

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5. Valuation dispersion has widened sharply this year. Will the current rotation help narrow the gap?
 
Source: Goldman Sachs, @TeddyVallee  


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Alternatives

1. US public pensions are among the world’s biggest private-equity investors.
 
Source: Institutional Investor   Read full article  
 
2. Here are the top sovereign wealth funds investing in private equity.
 
Source: Institutional Investor   Read full article  
 
3. The demand for alternatives is pushing private equity managers’ AUM higher.
 
Source: MarketDesk Research  


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Credit

1. High-yield bonds have been outperforming investment-grade.
 

 
2. The chart below shows some performance data for high-yield bonds.
 
Source: @WSJ   Read full article  
 
3. US default rates appear to have peaked.
 
Source: Torsten Slok, Apollo  
 
Relative to 2008, the increase in bankruptcies has been limited.
 
Source: Torsten Slok, Apollo  

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4. The AAA spread curve for US commercial mortgage-backed securities (CMBS) shows strong demand for long duration. News of the COVID-19 vaccine led to a 3-9 basis point rally for AAA spreads, with the long-end outperforming, according to Deutsche Bank.
 
Source: Deutsche Bank Research  
 
5. US dealer inventories across asset-backed securities, non-agency CMBS and residential mortgage-backed securities (RMBS) declined by $12 billion since early March.
 
Source: Deutsche Bank Research  
 
6. Consumer ABS bonds (credit cards, auto loans, etc.) have outperformed.
 
Source: @WSJ   Read full article  


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Rates

1. The copper-to-gold ratio is signaling higher Treasury yields.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. It appears that the Fed may not boost the pace of its securities purchases as a result of the vaccine news.
 
Source: Reuters   Read full article  
 
Here is Morgan Stanley’s forecast for the Fed’s balance sheet.
 
Source: @ISABELNET_SA, @MorganStanley  


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Commodities

1. Iron ore and steel prices continue to rally.
 
Singapore:

 
Shanghai:

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2. The vaccine news made gold less attractive for investors.
 
h/t Yvonne Yue Li  
 
3. Platinum futures are breaking above a three-month downtrend.
 
Source: @DantesOutlook  
 
4. So far, Palladium futures are holding support.
 
Source: @DantesOutlook  
 
5. Sugar and coffee prices are up sharply as Iota pummels Central America.
 

 
The December coffee futures contract held support.
 
Source: @DantesOutlook  

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6. US soybean futures continue to rally on tight global supplies.
 


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Energy

1. Brent crude is testing resistance at $45/bbl.
 

 
2. Libya’s oil output is almost back to normal.
 
Source: Commerzbank Research  
 
3. US natural gas futures are down sharply as the weather across the country remains warmer than normal.
 

Source: NOAA  


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Cruptocurrency

Bitcoin continues to rally, diverging from gold.
 

 
Source: @TheTerminal, @Schuldensuehner  


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Emerging Markets

1. Demand for EM local-currency bonds has been increasing. Indonesia’s 5-year yield hit a multi-year low.
 

 
2. The number of active COVID infections in India has been declining.
 
Source: Goldman Sachs  
 
This chart shows some high-frequency indicators for India.
 
Source: Goldman Sachs  

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3. Mobility indicators in the Philippines remain depressed.
 
Source: Barclays Research  
 
4. The market is currently pricing more than 600 basis points of rate hikes in Turkey over the next three months.
 
Source: BCA Research  
 
Barclays expects a 475 bp rate hike this month. It will get ugly if the central bank disappoints.
 
Source: Barclays Research  
 
Separately, home sales in Turkey are declining again.
 

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5. Israel’s Q3 GDP rebound surprised to the upside, driven by consumption and exports.
 

 
6. Russia’s non-fuel revenues improved in October.
 
Source: ING  
 
7. Nigeria’s CPI is soaring, driven by food prices.
 

 
8. Brazil’s industrial confidence has been improving.
 

 
But consumer sentiment turned lower.
 
Source: Goldman Sachs  

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9. The pandemic hit Peru’s economy particularly hard.
 

 
10. EM equities are starting to outperform developed markets.
 
Source: Longview Economics  
 
11. This chart shows EM currency performance by factor.
 
Source: Morgan Stanley Research  


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China

1. China is letting some corporate bonds default.
 
Source: @BloombergQuint   Read full article  
 

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2. Consumer activity is almost back to normal.
 
Source: Gavekal   
 
3. The US power advantage over China has narrowed.
 
Source: Gavekal   


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Asia – Pacific

1. Asian currencies continue to climb vs. USD.
 

 
The South Korean won:
 

 
The Chinese renminbi:
 

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2. Singapore’s exports unexpectedly declined.
 

 
3. The inclusion of more “new-economy” tech stocks has pushed the Hang Seng Index market value (not the level) to a record high.
 
Source: SCMP   Read full article  
 
4. New Zealand’s bond yields continue to rise.
 

 
This chart shows the non-resident holdings of New Zealand’s government bonds (% of total).
 

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5. Australia’s consumer confidence is up again.
 

 
Card spending in Australia remains elevated.
 
Source: CBA, @CommSec  

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6. The Nikkei 225 looks overbought.
 
Source: barchart.com  
 
7. Next, we have some data on RCEP.
 
The world’s largest trade bloc:
 
Source: Statista  
 
A third of the global economy (3 charts):
 
Source: @adam_tooze, @financialtimes   Read full article  
 
Source: @WSJ   Read full article  
 
Source: Commerzbank Research  


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The Eurozone

1. Here is the evolution of the Q4 GDP growth consensus forecast (Bloomberg survey).
 

 
And this is the GDP forecast for 2021 (the Eurozone and Germany).
 

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2. The trade-weighted euro index has outpaced EUR/USD.
 
Source: @RobinBrooksIIF, @TheTerminal  
 
3. The Greek 5-year bond yield is approaching zero.
 

 
4. Forecasts show a substantial decline in the euro-area prime-age workforce over the next two decades (which will drag down growth).
 
Source: Pantheon Macroeconomics  


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Canada

1. Manufacturing sales were up in September.
 

 
2. Home sales declined slightly last month.
 

 
3. Canada’s outstanding vaccine orders are impressive.
 
Source: The Economist   Read full article  


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The United States

1. The NY Fed’s November regional manufacturing report surprised to the downside. However, it doesn’t necessarily indicate softer manufacturing activity at the national level.
 
The headline index:
 

 
New orders:
 

 
Employment:
 

 
Employee workweek:
 

 
More firms are raising prices.
 

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2. US consumer balance sheets are relatively healthy due to a boost in the savings rate and lower interest rates. The chart below shows the financial obligations ratio and the mortgage debt service ratio.
 
Source: @business   Read full article  
 
3. The year-over-year growth in rents appears to have bottomed (except for the low-tier housing).
 
Source: CoreLogic  
 
4. Office vacancy rates have risen sharply.
 
Source: @markets   Read full article  
 
5. US financial conditions continue to ease, helped by the stock market rally.
 
Source: Goldman Sachs  
 
6. Finally, this map shows the rates of new infections by county.
 
Source: @WSJGraphics   Read full article  


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Food for Thought

1. US student performance in 2020 by household income:
 
Source: ECB   Read full article  
 
2. Degrees with the most student debt:
 
Source: Statista  
 
Student debt by educational attainment:
 
Source: @PplPolicyProj   Read full article  
 
Student debt distribution by age:
 
Source: @PplPolicyProj   Read full article  

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3. Short-term rentals vs. 2019:
 
Source: Statista  
 
4. Limited US grocery supplies:
 
Source: @WSJ   Read full article  
 
5. Urban vs. rural COVID infection rates:
 
Source: @axios   Read full article  
 
6. Having fewer kids in 2020:
 
Source: The Economist   Read full article  
 
7. The 10 pm curfew for bars and restaurants:
 
Source: YouGov America  
 
8. Apprehensions at the US-Mexico border:
 
Source: Pew Research Center   Read full article  
 
9. Reintroducing wild animals in the UK:
 
Source: @YouGov   Read full article  

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