Posted on by The Daily Shot Editor: Lev Borodovsky

Professional investors are not expecting higher inflation ahead

The Daily Shot: 14-Sep-21
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Rates
• Food for Thought

 

The United States

1. There are signs of moderation in the US housing market. 
 
Source: Variant Perception  
 
Homebuilder shares have been underperforming this month.
 

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2. Next, we have some updates on the labor market.
 
• The Evercore ISI business survey points to a rapid recovery in private-sector employment.
 
Source: Evercore ISI  
 
• When will the unemployment rate return to pre-COVID levels? Here is a survey of economists.
 
Source: IGM Forum  
 
• Many prime-age women have exited the labor force since the start of the pandemic.
 
Source: Pantheon Macroeconomics  

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3. Baby boomers, who control more than half of household wealth in the US, are starting to retire and shift into dissaving. 
 
Source: BCA Research  
 
4. Current industry concentration in the tech sector is similar to industrials in the late 1960s.
 
Source: Michael Cembalest; J.P. Morgan Asset Management  
 
5. Backlogs and tight capacity point to more capital expenditures and inventory rebuilding ahead.
 
Source: Gavekal Research  
 
6. Next, we have some updates on inflation.
 
• Consumer inflation expectations continue to rise (2 charts).
 
Source: NY Fed  
 
Source: @bespokeinvest   Read full article  
 
There is some disconnect between Americans with and without a college degree.
 
Source: NY Fed  
 
• Professional investors are not expecting higher inflation ahead.
 
Source: BofA Global Research; @Callum_Thomas  
 
• Rental costs have rebounded sharply from the 2020 lows.
 
Source: @markets   Read full article  
 
Here are some forecasts for rent and owners’ equivalent rent (OER) inflation.
 
Source: Nomura Securities  

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7. Finally, we have the year-to-date federal deficit, which has been less severe in 2021 than economists were expecting.
 

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Canada

1. Economists have sharply downgraded their forecasts for Canada’s Q3 GDP growth.
 

 
2. Consumer confidence should begin to stabilize.
 

 
3. Energy share valuations are lowest in 20 years despite stronger oil & gas prices.
 
Source: @ericnuttall  

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The United Kingdom

1. UK electricity prices continue to surge, …
 

 
… as natural gas prices hit new records.
 

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2. Hedge funds have turned bearish on the pound.
 
h/t @CormacMullen1  

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The Eurozone

1. German wholesale prices continue to climb.
 

 
• Petrochemicals’ costs have been soaring, pushing prices of plastics to new highs.
 
h/t @JLeeEnergy  
 
• Surging electricity costs, …
 
Source: @markets   Read full article  
 
… driven by record-high natural gas prices, are exacerbating producer price inflation.
 

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2. Italian unemployment ticked lower last quarter.
 

 
Separately, this chart shows the latest polls, with Brothers of Italy showing massive gains.
 
Source: @EuropeElects  

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3. This chart shows the OECD’s forecast for debt-to-GDP ratios in the Eurozone.
 
Source: OECD   Read full article  

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Europe

1. Here are the year-to-date stock market returns, by country.
 
Source: S&P Global Market Intelligence  
 
2. Europe is expected to lead in global EV adoption.
 
Source: @BloombergNEF   Read full article  
 
3. European total factor productivity has lagged the US for nearly two decades. 
 
Source: BCA Research  

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Asia – Pacific

1. Japan’s GDP remains well below pre-COVID levels.
 

 
2. South Korea’s export prices continue to surge.
 

 
Separately, below is a forecast for South Korea’s budget deficit and debt (from Fitch Ratings).
 
Source: Fitch Ratings  

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3. Here are Singapore’s visitor arrivals over time.
 
Source: @WSJ   Read full article  
 
4. New Zealand’s home price appreciation has been hitting record highs.
 
Source: ANZ Research  
 
But home sales slowed rapidly last month, amid COVID concerns.
 

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5. Next, we have some updates on Australia.
 
• Consumer and business confidence indicators have bottomed.
 

 

 
• The second-quarter increase in home prices was the highest on record.
 

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China

1. The nation’s credit impulse has been weakening.
 

 
Nonetheless, the total debt-to-GDP ratio keeps climbing.
 
Source: @dlacalle_IA  

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2. Chinese economy is under-taxed, with no property tax or capital gains tax and an effective personal tax rate of just 7%, far behind the US. 
 
Source: Alpine Macro  
 
3. The bond market is increasingly dominated by state-owned companies.
 
Source: Gavekal Research  
 
4. Hong Kong’s industrial production was above 2019 levels in Q2.
 

 
5. Shares of property developers are tumbling.
 

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Emerging Markets

1. Mexico’s industrial production improved in July.
 

 
Job creation remains robust.
 

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2. Argentina’s markets cheered the ruling coalition’s election loss.
 
Source: @bpolitics   Read full article  
 

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3. Brazil’s retail sales kept climbing in July.
 

 
4. India’s CPI report was softer than expected.
 

 
Separately, the drop in business confidence, hurt by rising raw material prices, does not bode well for corporate profits.
 
Source: Variant Perception  

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5. Malaysia’s industrial production declined sharply in July (pressured by the pandemic).
 

 
6. Turkey’s industrial production also declined.
 

 
7. Kazakhstan’s central bank hiked rates again.
 

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Cryptocurrency

1. The Golden Cross formation is a bullish sign for bitcoin.
 

 
2. Blockchain data shows a large accumulation of bitcoin occurred between the $29K and $50K price levels.
 
Source: Glassnode   Read full article  
 
• A rise in long-term bitcoin holder supply typically occurs near the end of a bear market.
 
Source: Glassnode   Read full article  
 
• Blockchain data also shows short-term holders selling at a loss (below their cost basis), which typically coincides with price recoveries.
 
Source: CryptoQuant   Read full article  

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3. This chart shows the amount of ETH assets being transferred to Solana to facilitate DeFi activities.
 
Source: @chasedevens, @wormholecrypto  
 
4. Solana’s (SOL) trading volume on Coinbase surged last month. SOL, the token for the open-source token used to facilitate decentralized applications, is up about 42% over the past month compared to a 9% decline in BTC.
 
Source: @CoinbaseInsto  
 
5. Crypto markets were whipsawed on fake news on Monday.
 
Source: Reuters   Read full article  
 
Source: barchart.com  

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Energy

1. US natural gas futures continue to surge.
 

 
In terms of price change, natural gas has been a standout in the commodity space this year.
 
Source: ANZ Research  
 
US natural gas prices could remain elevated into the winter.
 
Source: Cornerstone Macro  

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2. The front-month WTI crude oil contract has broken above a two-month downtrend.
 
Source: Dantes Outlook  
 
3. Shares of uranium miners are hitting multi-year highs.
 

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Equities

1. The Reddit vigilantes made shorting single stocks a dangerous endeavor. Traders are using index put options to offset/hedge their portfolio exposure. Here is the S&P 500 90/110 skew.
 
Source: @danny_kirsch  
 
With traders staying away from single-stock put options and focusing on index products instead, the spread between stock and index put-call ratios hit a multi-year low.
 
h/t @TheOneDave  

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2. Small-cap value stocks have outperformed growth this year, driven by meme stocks (2 charts).
 

 
Source: @WSJ   Read full article  
 
Separately, here is the sector breakdown for large-cap (Russell 1000) and small-cap (Russell 2000) indices.
 
• Growth:
 
Source: @LizAnnSonders  
 
• Value:
 
Source: @LizAnnSonders  

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3. Late-cycle stocks, which tend to be defensive, gained over the past few months.
 
Source: Deutsche Bank Research  
 
4. It’s been a good few days for secondary share offerings.
 
Source: @markets   Read full article  
 
5. 2021 hasn’t been a good year for IPO performance globally.
 
h/t @Schuldensuehner  
 
6. Financials saw some outflows recently.
 
Source: BofA Global Research  
 
7. Share buyback activity remains robust.
 
Source: @ISABELNET_SA, @GoldmanSachs  

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Rates

There have been more QE purchases than Treasury issuance. The situation will reverse once the debt ceiling is lifted.
 
Source: Nordea Markets  

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Food for Thought

1. E-commerce payment methods in the US and Europe.
 
Source: @axios   Read full article  
 
2. Satellite launches by year:
 
Source: @axios   Read full article  
 
3. The data era:
 
Source: Morgan Stanley Research  
 
4. US judicial nominations:
 
Source: Reuters   Read full article  
 
• US ambassadorial nominations:
 
Source: @axios   Read full article  

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5. Are people too easily offended?
 
Source: The Economist   Read full article  
 
6. Feelings about the US 2022 midterm elections:
 
Source: Morning Consult   Read full article  
 
7. The most searched and visited news websites:
 
Source: Visual Capitalist   Read full article  
 
8. COVID cases among US children:
 
Source: The Economist   Read full article  
 
9. Change in US population share:
 
Source: @WSJ   Read full article  
 
10. Americans’ views on famous billionaires:
 
Source: Statista  

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