The Daily Shot: 25-Feb-21
• The United States
• Canada
• The Eurozone
• Asia – Pacific
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the housing market.
• New home sales started the year on a strong note (well above Jan 2020 levels).
– Sales of higher-end homes picked up last month.
– Measured in months of supply, inventories of new homes are at multi-year lows.
• Will housing continue to boost retail sales?
Source: @WSJ Read full article
• As Treasury yields climb (see the rates section), a rise in the 30-year mortgage rate could weigh on housing activity.
Source: BCA Research
• The chart below shows the ratio of home prices to family incomes (similar to this trend).
Source: Evercore ISI
• Loan applications to purchase a home declined last week.
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2. Will last year’s spike in savings convert into substantially stronger consumer spending this year? Will it boost inflation?
Source: @TCosterg
Here is an estimate of “excess” savings from TS Lombard.
Source: TS Lombard
Online search activity suggests that consumers are losing interest in saving, which points to increased spending ahead. It could also indicate more flows into the stock market.
Source: Arbor Research & Trading
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3. Here is the Wage Phillips Curve for the US. Can you spot government checks?
Source: @ernietedeschi
4. Next, we have some updates on the labor market.
• An alternative measure of the unemployment rate:
Source: Mizuho Securities USA
• Labor force participation by age:
Source: Oxford Economics
• The participation “shortfall” is increasingly driven by older Americans (retirement).
Source: Oxford Economics
Source: Oxford Economics
• Pandemic-driven changes in employment by wage category:
Source: @bcheungz Read full article
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Canada
1. The yield curve continues to steepen.
h/t Robert Fullem
2. Home price appreciation has been broad.
Source: Economics and Strategy Group, National Bank of Canada
3. Uninsured mortgage originations keep climbing.
Source: Economics and Strategy Group, National Bank of Canada
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The Eurozone
1. French business confidence was a bit softer than expected this month.
However, new orders-to-inventory estimates point to further gains in industrial output.
Source: Pantheon Macroeconomics
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2. According to Deutsche Bank, Germany’s economic recovery this year will be primarily driven by exports.
Source: Deutsche Bank Research
Separately, this chart shows the divergence between Germany’s commercial and residential property prices.
Source: Commerzbank Research
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3. Global supply chain disruptions are distorting euro-area manufacturing PMI data. Will we see further increases in pricing pressure?
Source: Barclays Research
4. This chart shows the banking sector’s cost of negative rates with and without the TLTRO program.
Source: Bloomberg Read full article
5. Over longer periods, the US and Eurozone inflation indices (apples-to-apples comparison) tend to track each other quite well. The US CPI is just more volatile.
6. Economic expectations are rebounding, which could benefit EUR/USD.
Source: Alpine Macro
The euro is broadly at purchasing power parity.
Source: Gavekal Research
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Asia – Pacific
1. Taiwan’s export orders are nearly 50% above last year’s levels amid semiconductor shortages.
2. South Korea’s demographics don’t look promising.
Source: Statista
3. New Zealand’s bond yields are soaring. The market is now pricing in a possibility of a rate hike later this year.
4. Australia’s CapEx jumped in Q4, driven by non-mining sectors.
Source: ANZ Research
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Emerging Markets
1. Brazil’s consumer confidence ticked up this month.
Inflation is grinding higher, but the pace has been a bit slower than expected.
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2. Unlike other countries, Colombia’s retail confidence has been outpacing sentiment at industrial firms.
3. Mexico’s retail sales weakened in December. This is going to be a long recovery.
4. The World Economics SMI report on India points to persistent weakness in business activity as margins deteriorate.
Source: World Economics
5. Some EM countries are outpacing developed nations in their vaccination progress.
Source: Oxford Economics
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Cryptocurrency
1. Digital asset investment products saw inflows totaling $492 million last week, with Bitcoin (BTC) products accounting for $412 million.
Source: CoinShares Read full article
2. Online search activity for cryptos has accelerated.
Source: Arbor Research & Trading
3. The current BTC drawdown is the largest since January.
Source: @CoinDeskData
4. Ethereum (ETH) has underperformed BTC since its CME futures launch, accelerating during the recent crypto selloff.
Source: @CoinDeskData
5. It’s been a tough week for cryptocurrencies so far.
Source: FinViz
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Commodities
1. Industrial metals keep climbing.
• US copper (highest since 2011):
• Nickel (boosted by hedge funds):
Source: Macquarie Strategy, @Scutty
• Steel futures in China:
Steel prices in North America have risen sharply.
Source: Fitch Solutions Macro Research
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2. Gold held support, but higher bond yields will remain a drag on the precious metal.
Source: barchart.com
3. US wheat futures have been soaring.
The charts below show “new crop” soybeans and corn futures (maturing this fall).
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4. The Agriculture Department’s cold storage report showed declining pork belly and trim stocks, sending hog futures sharply higher.
5. It’s been a good month for commodities.
Source: @DavidInglesTV
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Energy
1. Last week’s freezing weather in Texas sent refinery runs to multi-year lows.
• Gasoline deliveries tumbled as well.
• And here is fuel ethanol production.
Source: @kannbwx
• Crude oil imports tumbled.
Source: @JeoffHall
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2. US crude oil inventories continue to decline.
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Equities
1. Let’s start with some relative performance trends over the past year.
• Small caps:
• Equal-weight S&P 500 (closing the gap):
h/t Nancy Moran
• Banks (closing the gap):
• High-beta stocks:
• Momentum factor:
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2. Mega-cap companies continue to underperform.
3. Some models suggest that given current valuations, long-term S&P 500 performance will be negative.
Source: @hussmanjp
4. The popular ARK Innovation ETF saw some outflows.
5. Here we go again.
6. An unusually high percentage of large-cap mutual funds have outperformed their benchmark this year.
Source: @ISABELNET_SA, @GoldmanSachs
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Rates
1. Treasury yields keep climbing, with the 10yr breaching 1.4%.
• Here is the 30yr yield.
And this chart shows the iShares 20+ Year Treasury ETF.
• The recent yield gains have been driven by real rates (TIPS yields) rather than inflation expectations.
• According to Alpine Macro, the 10yr Treasury yield has yet to return to “fair value.”
Source: Alpine Macro
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2. The yield curve is steepening across maturities, including at the short end.
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3. CTAs/macro hedge funds have been shorting Treasuries and got rewarded for it.
Source: @StephenSpratt Read full article
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Global Developments
1. The dollar’s decline typically occurs during times of US equity market underperformance relative to the world.
Source: BCA Research
Here is the US dollar’s seasonal trend.
Source: BCA Research
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2. The IMF expects global growth to bounce back this year.
Source: Gavekal Research
However, many economies that had a strong Q4 are expected to shrink this quarter.
Source: Oxford Economics
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Food for Thought
1. Prevalence of lactose intolerance globally:
Source: Wikipedia Read full article
2. Pandemic-induced anxiety and depression:
Source: Statista
3. Encouraging vaccine data from the UK:
Source: @financialtimes Read full article
4. Wikipedia editors in different languages:
Source: The Economist Read full article
5. US homeowners who lived in their homes for more than twenty years:
Source: @WSJ Read full article
6. US states’ population change over the past decade:
Source: reddit
7. Who are the top income earners in the US?
Source: BCA Research
8. Projected US debt-to-GDP ratio:
Source: ProPublica Read full article
9. The chess boom:
Source: @chartrdaily
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