The Daily Shot: 20-Dec-21
• Administrative Update
• Equities
• Credit
• Rates
• Commodities
• Energy
• Cryptocurrency
• Emerging Markets
• China
• Asia – Pacific
• The Eurozone
• Europe
• The United Kingdom
• Canada
• The United States
• Global Developments
• Food for Thought
Administrative Update
The Daily Shot will not be published the week of January 27th.
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Equities
1. Last week, the Federal Reserve confirmed that it will be rapidly removing monetary stimulus next year. Now the fiscal spigot is getting shut off as well.
Source: Reuters Read full article
Source: @business Read full article
Stock futures are heavy this morning.
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2. The only down year for the S&P 500 this decade was when the Fed raised rates above 1%.
Source: BofA Global Research
3. The S&P 500 futures liquidity declined this month.
Source: Deutsche Bank Research
4. This year, the valuation of growth companies has been very sensitive to the movement in rates.
Source: Trahan Macro Research
5. Tech stocks tend to underperform during periods of high inflation.
Source: Denise Chisholm, Fidelity Investments Read full article
• Tech stocks have often lagged after the leading economic indicator (LEI) peaked.
Source: Denise Chisholm, Fidelity Investments Read full article
• Mega-cap growth and tech earnings are well above their prior trend.
Source: Deutsche Bank Research
However, relative earnings have not grown as fast this year, and Deutsche Bank expects further flattening.
Source: Deutsche Bank Research
• Tech still lags all other sectors in terms of pages of federal regulation.
Source: KKR
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6. This chart shows the S&P 500 members’ performance distribution for 2021.
Source: S&P Global Market Intelligence
Equity returns have been broader this year than in 2020.
Source: S&P Global Market Intelligence
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7. Investment managers have become more cautious this month, reducing their average exposure to US stocks.
Source: NAAIM
8. This scatterplot depicts how different equity factors correlate to real vs. nominal Treasury yields.
Source: @acemaxx, @MorganStanley
9. The 2021 cannabis bubble continues to deflate.
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Credit
1. Most US and European corporate bonds now have negative real yields.
Source: Deutsche Bank Research
2. Corporate loans with 6x and higher leverage found plenty of buyers in 2021.
Source: @jessefelder, @FT Read full article
3. With household excess savings surging, US credit card charge-off rates tumbled this year.
Source: Longview Economics
4. Real estate spreads are still attractive relative to corporate credit.
Source: J.P. Morgan Asset Management
5. Finally, this chart shows private credit fundraising by type.
Source: J.P. Morgan Asset Management
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Rates
1. US banks’ securities holdings surged since the start of the pandemic (log scale).
h/t Deutsche Bank Research
This chart shows securities as a share of total bank credit.
h/t Deutsche Bank Research
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2. Next, we have the recent accumulation of Treasuries by state and local governments.
Source: Deutsche Bank Research
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Commodities
1. Bloomberg’s broad commodity index is testing support at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Fitch expects lower commodity prices in 2022 due to rising supply and fading demand growth.
Source: Fitch Solutions Macro Research
Corn and soybean markets are expected to flip into surpluses next year, which could weigh on prices.
Source: Fitch Solutions Macro Research
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3. This table shows JP Morgan’s price forecasts for precious metals.
Source: J.P. Morgan Asset Management
• Gold has been trading at a discount to US 10-year real yields for most of the year.
Source: J.P. Morgan Asset Management
• Gold has been following the 1970s trajectory.
Source: @CRutherglen Read full article
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Energy
1. Crude oil is down this morning as fiscal and monetary stimulus in the US is removed (which could weigh on demand). COVID is also a concern.
Speculative accounts have been reducing their bets on oil.
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2. US rig count continues to grind higher.
3. OPEC+ could fall short of its production target as Angola and Nigeria have been coming under quota over the past few months, according to ANZ Research.
Source: ANZ Research
4. The spread between US natural gas and global LNG prices has blown out.
• US liquefaction facilities are seeing growing demand for natural gas as exports surge.
Source: @HMgmt1999, @PlattsLNG Read full article
• Southeast Asia’s net LNG imports are expected to rise over the next few years, …
Source: Fitch Solutions Macro Research
… as the region’s LNG exports shrink.
Source: Fitch Solutions Macro Research
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Cryptocurrency
1. Bitcoin remains near the 200-day moving average, …
… as it continues to lag ether.
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2. Bitcoin fund flows have been negative.
Source: @ISABELNET_SA, @jpmorgan
3. VCs pumped quite a bit of money into the crypto industry this year.
Source: @business Read full article
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Emerging Markets
1. The Turkish lira continues to plummet. Inflation will hit new highs, putting pressure on Erdogan’s government.
Dollar bond yields and CDS spreads have been climbing.
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2. Russia’s central bank hiked rates again by 100 bps. The hiking cycle is probably nearing completion for now.
Russian bond yields declined.
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3. South Africa’s COVID cases have been surging.
But COVID-related deaths have been relatively low.
Source: Deutsche Bank Research
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4. Indian shares are rolling over.
India’s high-contact services sector recovery has a long way to go.
Source: Gavekal Research
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5. Colombia’s central bank hiked rates again.
6. Economists have accelerated their downgrades for Brazil’s 2022 GDP growth (now below 1%).
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China
1. The PBoC unexpectedly cut the 1-year prime loan rate, indicating that Beijing is increasingly concerned about slowing economic growth.
Source: South China Morning Post Read full article
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2. Offshore debt defaults hit a record high this year.
Source: @markets Read full article
3. Steel output tumbled in 2021.
4. The Shanghai Shenzhen CSI 300 index is back near support.
Shares in Hong Kong remain under pressure.
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Asia – Pacific
1. Japan is seeing net inflows into the bonds and outflows from equities.
Source: Deutsche Bank Research
2. COVID cases are hitting record highs in South Korea and Australia.
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3. New Zealand’s exports strengthened further in November.
Business confidence continues to deteriorate.
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The Eurozone
1. Germany’s Ifo business expectations index keeps sinking as the pandemic takes a toll.
Source: ifo Institute
But restaurant visits appear to be bottoming.
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2. Bund yields and German growth have been moving in tandem.
Source: BCA Research
3. Euro-area construction output strengthened in October.
4. Job vacancy rates have been climbing.
Source: Eurostat Read full article
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Europe
1. Russian natural gas flows to the EU have been shut off again.
2. European equities have a significant premium in their dividend yield relative to Bund yields.
Source: BCA Research
3. Bund yields and European stock prices typically move together.
Source: BCA Research
4. This chart shows industrial production growth across the EU.
Source: Eurostat Read full article
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The United Kingdom
1. The pound has given up its BoE rate-hike gains.
Asset managers have been boosting their bets against the pound.
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2. COVID cases are surging.
Mobility has been slipping.
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3. London still leads European IPOs.
Source: Bloomberg Read full article
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Canada
1. The Canadian dollar is at the lowest level in a year.
2. COVID cases are rising, …
… and restaurant activity is slowing.
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3. Home price appreciation has peaked.
4. The labor market recovery has been broad.
Source: Oxford Economics
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The United States
1. Economists sharply raised their inflation forecasts for next year, …
… as a record share of firms plan price hikes.
Source: Pantheon Macroeconomics
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2. Wage pressures, measured by the employment cost index (ECI), are broad and at levels not consistent with the Fed’s mandate.
Source: ANZ Research
Source: @WSJ Read full article
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3. Will wage pressures drive improvements in productivity?
Source: BofA Global Research; @acemaxx
4. Residential construction activity was strong in November.
• There are a lot of units currently under construction.
Source: Wells Fargo Securities
• Here is a forecast for housing starts from Wells Fargo.
Source: Wells Fargo Securities
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5. The disconnect between ISM and Markit services PMI measures has blown out. Economists see the ISM measure, which was distorted by supply shortages, moving lower in the months ahead.
Source: Capital Economics
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Global Developments
1. Hedge funds have reduced their bets against the yen as risk appetite wanes.
2. The trade-weighted dollar is overvalued relative to its long-term average.
Source: BofA Global Research
3. Return to the office will stall again.
Source: Bloomberg Read full article
4. Debt service ratios in some economies are at generational lows.
Source: ANZ Research
This chart shows excess household savings in select economies.
Source: Oxford Economics
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Food for Thought
1. Self-employed workers in the US:
Source: @WSJ Read full article
2. Work stoppages ending in each quarter:
Source: Bloomberg Read full article
3. Inflation-adjusted minimum wage in the US:
Source: Morgan Stanley Research
4. Changing jobs to work from home:
Source: WFH Research Read full article
5. New startups valued at $10 billion or more (decacorns):
Source: Crunchbase Read full article
6. Most popular social media apps in the US:
Source: The Washington Post Read full article
7. Indian-born US tech CEOs:
Source: Statista
8. Unruly passengers:
Source: FAA Read full article
9. Plastic surgery procedures:
Source: Statista
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