Trends in US business investment

The Daily Shot: 04-May-21
The United States
Canada
The United Kingdom
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The April ISM Manufacturing PMI unexpectedly pulled back from the highs. While factory activity remains exceptionally strong, there are signs that supply-chain bottlenecks are becoming a drag on production and employment.
 

 
Source: Reuters   Read full article  
 
Here is the breakdown of the ISM index.
 
Source: @GregDaco  
 
Below are some indicators of supply-chain pressures.
 
Order backlog:
 

 
Manufacturers’ estimates of customers’ inventories:
 
Source: Piper Sandler¬†  
 
Prices paid:
 

 
Economists expect the situation to ease in the months ahead.
 
Source: @ScottMinerd   Read full article  
 
Has the ISM index peaked?
 
Source: Pantheon Macroeconomics  

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2. Next, we have some updates on inflation.
 
This chart compares the ISM prices paid (above) with the CPI inflation.
 
Source: @macro_daily  
 
Base effects in the core PCE inflation will reverse in 2022.
 
Source: @ScottMinerd   Read full article  
 
Price gains in the overall economy (GDP deflator) have been outpacing consumer inflation.
 
Source: Mizuho Securities USA  
 
The 5-year USD inflation swap, an estimate of inflation expectations, is at multi-year highs.
 

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3. Residential and non-residential construction spending trends continue to diverge.
 

 
Public construction spending has slowed.
 

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4. US automobile sales hit the highest level in years.
 

 
5. Below are some trends in US business investment.
 
Tech CapEx:
 
Source: Cornerstone Macro  
 
Investment in tech vs. structures:
 
Source: Reuters   Read full article  
 
Commercial, manufacturing, and office CapEx as a share of total investment:
 
Source: Reuters   Read full article  
 
Morgan Stanley’s index of CapEx plans :
 
Source: Morgan Stanley Research  
 
Investment growth vs. employment growth:
 
Source: @TCosterg  

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6. How has the pandemic changed output across different sectors?
 
Source: The New York Times   Read full article  
 
7. What will happen to the federal government’s massive portfolio of student debt? Will borrowers resume payments when the interest holiday ends?
 
Source: @WSJ   Read full article  
 
8. Finally, we have private-sector financial assets as a percentage of GDP.
 
Source: @ISABELNET_SA, @BofAML  


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Canada

1. The GDP recovery will take time.
 

 
2. The manufacturing PMI came off the highs last month (similar to the US).
 


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The United Kingdom

1. Home price appreciation strengthened last month.
 

 
2. UK households are sitting on massive savings.
 
Source: Longview Economics  
 
3. Here is the nation’s tax revenue as a share of GDP.
 
Source: @financialtimes   Read full article  


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Europe

1. Factory activity across Western Europe has been remarkably strong. Here are some manufacturing PMI trends.
 
The Netherlands:
 
Source: IHS Markit  
 
Ireland:
 
Source: IHS Markit  
 
The Eurozone:
 
Source: IHS Markit  
 
Sweden:
 

 
Denmark:
 

 
Switzeland:
 

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2. Just like in the US, European supply chains are strained (2 charts).
 
Source: @financialtimes   Read full article  
 
Source: Gavekal Research  

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3. German March retail sales topped economists’ forecasts.
 

 
4. The Swiss economy is on fire.
 

 
5. Poland’s inflation surprised to the upside.
 

 
6. EU battery production soared over the past year.
 

 
7. EuroStoxx implied and realized correlations are at multi-year lows.
 
Source: Morgan Stanley Research  


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Asia – Pacific

1. South Korea’s CPI surprised to the upside.
 

 
Source: ING  
 
Separately, the South Korean economy remains heavily dependent on exports.
 
Source: @WSJ   Read full article  

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2. Australia’s housing credit is expanding rapidly.
 
Source: ANZ Research  


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China

1. Here is China’s debt by sector.
 
Source: Alicia Garcia-Herrero, Natixis  
 
2. The decline in credit impulse and money supply growth points to moderation in construction activity and raw material prices. 
 
Source: BCA Research  
 
3. The market cap of major Chinese internet companies has declined this year partly due to the government’s antitrust crackdown.
 
Source: Gavekal Research  
 
4. Hong Kong’s GDP growth was shockingly strong last quarter.
 


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Emerging Markets

1. Let’s start with Chile.
 
Economic activity:
 

 
The unemployment rate:
 

 
Manufacturing output (stronger than expected):
 

 
Copper production:
 

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2. Colombia’s finance minister quit, spooking the markets.
 
Source: @financialtimes   Read full article  
 
The peso:
 

 
The stock market:
 

 
Separately, here is Colombia’s unemployment rate.
 

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3. Mexico’s business activity is improving.
 
IMEF indices:
 

 
Markit PMI:
 
Source: IHS Markit  
 
Mexico’s remittances hit a record high.
 

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4. Brazil’s exports surged over the past couple of months.
 

 
Manufacturing growth has been moderating.
 
Source: IHS Markit  

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5. Indonesia’s inflation remains subdued.
 

 
6. South Africa’s private credit has been shrinking (similar to Mexico).
 

 
South Africa’s trade surplus hit a record high.
 

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7. EM value stocks are testing long-term resistance.
 
Source: Alpine Macro  


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Cryptocurrency

Ether continues to surge.
 


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Commodities

1. Palladium surged to a record high.
 

 
Here is the gold-palladium ratio.
 

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2. Speculative net-long positions in silver futures increased over the past few weeks but remain below peak levels. 
 
Source: Longview Economics  
 
3. Given softer manufacturing growth in China, is copper vulnerable?
 
Source: Nordea Markets  
 
4. Bloomberg’s industrial metals index is at multi-year highs.
 

 
5. It’s a great time to operate a lumber company.
 
Source: @WSJ   Read full article  


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Equities

1. Let’s begin with some trends in big tech stocks.
 
Revenue growth:
 
Source: @financialtimes   Read full article  
 
Percent of S&P 500 market cap:
 
Source: @WSJ   Read full article  
 
The Nasdaq 100 relative performance:
 

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2. Non-profitable tech companies are underperforming.
 

 
3. SPACs continue to lag.
 

 
4. It’s been a rough month for semiconductor shares.
 

 
But transportation stocks are outperforming.
 

 
Source: Bloomberg   Read full article  

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5. S&P 500 margins surged last quarter.
 
Source: BofA Global Research; @carlquintanilla  
 
6. Here is Deutsche Bank’s estimate for 2021 earnings per share.
 
Source: Deutsche Bank Research  
 
Earnings expectations got pulled forward (from 2022 to 2021).
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  

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7. Fund flows strengthened over the past couple of weeks.
 
Source: @ISABELNET_SA, @BofAML  
 
8. Here is a look at equity factor performance.
 
Source: S&P Global Market Intelligence  
 
9. Leveraged long equity ETF AUM soared over the past year.
 
Source: @Callum_Thomas, @topdowncharts  


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Credit

1. US high-yield spreads hit a multi-year low.
 

 
2. Will we see some pressure on high yield as central banks taper QE?
 
Source: BCA Research  
 
3. US corporate net issuance has receded since October 2020.
 
Source: Richard Bernstein Advisors  


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Rates

1. Massive liquidity continues to depress money market rates. Here is the 12m T-Bill – OIS spread.
 

 
Will the Fed be forced to adjust IOER to bring the fed funds rate toward the middle of the range?
 

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2. The 10-year Treasury note is oversold as yields enter a seasonally weak period (2 charts).
 
Source: Variant Perception  
 
Source: Variant Perception  


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Global Developments

1. Speculators are modestly net-long the dollar.
 
Source: Longview Economics  
 
The dollar appears oversold at short-term support.
 
Source: Dantes Outlook  

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2. Here is a summary of Markit’s manufacturing PMI.
 
Source: IHS Markit  
 
3. Consumer prices did not accelerate after past pandemics.
 
Source: The Economist  


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Food for Thought

1. US drug overdose deaths:
 
Source: The Economist   Read full article  
 
2. Fatal car crashes by age:
 
Source: AARP   Read full article  
 
3. US concerns about healthcare affordability:
 
Source: Gallup   Read full article  
 
4. Vaccine enthusiasm:
 
Source: @axios   Read full article  
 
US vaccine hesitancy:
 
Source: @axios   Read full article  

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5. Maritime choke points:
 
Source: Visual Capitalist   Read full article  
 
6. Democracy losing ground:
 
Source: FreedomHouse   Read full article  
 
7. US trade deficit by country:
 
Source: Sam Kyei  
 
8. Changing of clocks:
 
Source: Statista  

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