The Daily Shot: 15-Jun-21
• The United States
• Canada
• Europe
• Asia – Pacific
• Emerging Markets
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the housing market.
• US consumers now view the buying conditions for houses as worst in years, as prices surge (2 charts).
Source: Fannie Mae, @Not_Jim_Cramer Read full article
• Home prices continued to climb last month, with a majority of houses selling above list prices.
Source: Redfin
• Inventories remain tight.
Source: Redfin
Source: Redfin
• Americans expect home prices to climb much faster going forward.
Source: @Not_Jim_Cramer
• Home equity is rising rapidly, outpacing debt (the housing market is “deleveraging”).
Source: @lenkiefer
Source: CoreLogic
• Mortgage activity suggests that second home purchases moderated in recent months (though still elevated).
Source: @carlquintanilla, @business Read full article
• A growing share of 25-34-year-olds live with their parents. Will we see substantial pent-up demand from first-time homebuyers over the next few years?
Source: Mizuho Securities USA
• Google searches for apartments have cooled as rental prices rise from low levels.
Source: Arbor Research & Trading
This map shows rent price trends by state.
Source: Apartment Guide Read full article
• Increases in rental costs for single-family homes are accelerating, led by high-tier properties.
Source: CoreLogic
• Gains in owners’ equivalent rent (OER) have been stronger in small cities.
Source: Nomura Securities
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2. Next, we have some updates on wage trends.
• Wages have decoupled from the monetary policy.
Source: Pantheon Macroeconomics
• However, the Atalanta Fed’s wage tracker is yet to show an acceleration in pay increases.
Source: @AtlantaFed
• Has the wage share in GDP finally bottomed?
Source: Morgan Stanley Research
Businesses are much less labor-intensive these days.
Source: @ISABELNET_SA, @BofAML
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3. With more Americans retiring, …
Source: @WSJ Read full article
… the Fed may have to rethink its forecasts for “full employment” timing (the gap below may be overstating the labor market weakness).
Source: Pantheon Macroeconomics
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4. US households expect to spend substantially more over the next 12 months.
Source: NY Fed
5. Americans are now driving more than they did in 2019.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
6. CEO business confidence is the highest on record.
Source: Longview Economics
7. The US is nearing herd immunity, …
Source: Oxford Economics
… but new variants pose a risk.
Source: Pantheon Macroeconomics
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Canada
1. Manufacturing sales dipped in April.
2. Consumer confidence is holding at multi-year highs.
3. Single-family homes have seen stronger price growth than condo apartments over the past year.
Source: Desjardins
The sales-to-new listings ratio has started to decline in Quebec and Ontario this year.
Source: Desjardins
Housing affordability has deteriorated over the past few months as property prices accelerate and interest rates start to rise again.
Source: Desjardins
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4. Population growth stalled last year.
Source: @RichardDias_CFA
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Europe
1. Euro-area industrial production climbed in April.
But gains have been uneven.
Source: Pantheon Macroeconomics
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2. French business bankruptcies tumbled since the start of the pandemic (due to state aid), even as debt levels surged.
Source: @MichaelaArouet, @Lvieweconomics
3. Poland’s exports are near record highs.
4. The European Union’s debt issuance (separate from individual states’ debt) will peak next year.
Source: Nordea Markets
5. China is the EU’s largest trading partner.
Source: @WSJ Read full article
6. Flows into Europe-focused ETFs have accelerated in recent weeks.
Source: Arbor Research & Trading
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Asia – Pacific
1. Japan’s industrial capacity utilization is above pre-COVID levels.
2. Aussie-yen, an indicator of global risk appetite, is in a wedge pattern. Will we see a breakout?
h/t Michael G. Wilson
3. South Korea’s broad money supply growth is above 11% for the first time in over a decade.
4. Australia’s stock market benchmark hit another record high.
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Emerging Markets
1. India’s inflation surprised to the upside, creating a potential headache for the RBI.
Bond yields jumped in response to the CPI surprise.
Wholesale prices are rising rapidly.
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2. Romania’s industrial production is approaching record highs.
3. Russia’s exports surprised to the upside.
4. Brazil’s April economic activity was disappointing, but it held above pre-COVID levels.
5. Here is a look at fiscal deficits.
Source: IIF
6. Few economies have positive real policy rates (rates set by central banks less inflation).
Source: Oxford Economics
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Commodities
1. The rally in copper is fading.
2. Gold has resumed its long-term uptrend, …
Source: Alpine Macro
… supported by central bank excess liquidity.
Source: Alpine Macro
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3. US cotton futures are in a wedge pattern.
4. Flows into commodity ETFs have been unprecedented.
Source: Arbor Research & Trading
Is commodity positioning becoming stretched?
Source: BofA Global Research; @Callum_Thomas
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Energy
1. Will underinvestment in oil extraction exacerbate the market deficit over the next few years?
Source: @WSJ Read full article
2. This chart shows the OPEC+ spare capacity (“other OPEC+” is mostly Kazakhstan).
Source: World Bank Group
3. European natural gas prices are approaching multi-decade highs.
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Equities
1. US indices hit record highs again as the market rebounded at the end of the day.
Source: @WSJmarkets Read full article
2. Stock-bond correlations remain at multi-year highs.
3. Equities and fixed-income markets are sending different signals on inflation, …
h/t Cormac Mullen
… amid massive inflows into inflation-sensitive stocks.
Source: Arbor Research & Trading
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4. A weak US dollar could be a headwind for multiple expansion.
Source: @jessefelder, @financialtimes Read full article
5. Is the market ignoring China-related trade uncertainties?
Source: TS Lombard
6. Risk parity strategies are outperforming as the Fed holds rates near zero.
Source: Morgan Stanley Research
7. US market short interest continues to shrink.
Source: @financialtimes Read full article
8. The momentum factor got whipsawed as newly-included value stocks underperform.
9. Google searches for “meme stocks” are starting to decline from extreme levels last month.
Source: BCA Research
10. A majority of long-only investors surveyed by Evercore ISI have increased their exposure to financial and material stocks relative to the S&P 500 over the past month (2 charts).
Source: Evercore ISI
Source: Evercore ISI
Hedge funds surveyed by Evercore ISI have increased their equity exposure over the past two weeks, albeit still below peak levels from earlier this year.
Source: Evercore ISI
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Credit
1. Rising oil prices sent US high-yield bond spreads to new lows.
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2. BDC debt issuance surged last year.
Source: Olivia Raimonde, Bloomberg Finance L.P. Read full article
3. Corporate leverage has increased sharply over the past year while defaults are relatively low.
Source: Mizuho Securities USA
4. Here is a look at the US corporate bond market-cap by rating …
Source: Mizuho Securities USA
…and duration by rating category.
Source: Mizuho Securities USA
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5. Below is an overview of debt yields across the USD fixed-income markets.
Source: Goldman Sachs; h/t James W.
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Rates
1. Investor bond allocations remain near extreme lows.
• Fund managers:
Source: BofA Global Research; @Callum_Thomas
• Merrill Lynch private clients:
Source: @ISABELNET_SA, @BofAML
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2. Are Treasury yields signaling a peak in global consumer spending?
Source: Arbor Research & Trading
3. When will the Fed announce QE taper?
Source: BofA Global Research; @Callum_Thomas
When will the Fed begin tapering?
Source: Cornerstone Macro
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4. Fed officials continue to view inflation as transitory.
Source: Arbor Research & Trading
5. The US Treasury continues to rapidly withdraw cash from its account at the Fed.
6. The US shadow rate hit the lowest level in years.
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Global Developments
1. Currency markets’ implied volatility continues to decline.
Low volatility in fixed income has benefitted high-yielding government bonds versus low-yielders.
Source: BCA Research
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2. Semiconductor prices are well above trend.
Source: @SnippetFinance, @jpicerno
3. Renting a home is common in many countries.
Source: Desjardins
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Food for Thought
1. US government employment:
Source: Brookings Read full article
2. Undernourishment, diet composition, and income:
Source: @adam_tooze; IMF WEO April 2021.
3. Asian-origin groups in the US:
Source: Pew Research Center Read full article
4. Falling fertility and aging populations:
Source: Pew Research Center Read full article
5. Changes in US birth rates by mother’s age:
Source: @axios Read full article
6. US Southwest border apprehensions by country of origin:
Source: CBP
7. Biden agenda’s impact on the federal budget:
Source: Cornerstone Macro
8. Support for executive actions or bills:
Source: The Economist Read full article
9. Monday was Flag Day.
• First national flag of the United States (Grand Union Flag, 1775):
Source: Legends of America Read full article
• How to fold the US flag:
Source: EWHS AFJROTC Read full article
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