US stocks trailing the rest of the world as growth sectors come under pressure

The Daily Shot: 24-Jan-22
Equities
Rates
Commodities
Energy
Cryptocurrency
China
Asia – Pacific
The Eurozone
Europe
The United Kingdom
Canada
The United States
Global Developments
Food for Thought



 

Equities

1. The S&P 500 dipped below the 200-day moving average for the first time since June of 2020 as the selloff continued on Friday. Technicals suggest that the S&P 500 is oversold.
 

 
2. It was a rough week for stocks globally.
 
Source: @acemaxx, @FT   Read full article  
 

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3. The number of Nasdaq stocks hitting 52-week lows surged.
 

 
The largest Nasdaq 100 ETF (QQQ) volume hit a new high.
 
Source: @EricBalchunas  
 
Some tech mega-caps are approaching or have entered bear-market territory.
 

 
Source: Bloomberg   Read full article  

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4. US stocks are now trailing the rest of the world as growth shares come under pressure.
 

 
The percentage of ex-US equity markets registering a 21-day relative high versus the S&P 500 surged to its highest level in more than three years.
 
Source: SentimenTrader  

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5. The rotation out of cyclicals continues.
 

 
6. Stocks favored by hedge funds keep widening their underperformance.
 
  Further reading  
 
7. Retail investors are capitulating.
 

 
8. The S&P 500 forward P/E ratio (a measure of valuation) dipped below 20 but remains above pre-COVID levels.
 

 
The situation is quite different for small caps.
 

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9. Sentiment has turned decisively bearish (a positive sign for stocks in the near-term).
 
The put/call ratio:
 

 
Market timers’ recommended equity exposure:
 
Source: @DrStoxx, @MktwHulbert  

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10. The VIX curve has finally inverted, …
 

 
… but there is room for more backwardation.
 

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11. Next, we have the month-to-date sector returns.
 

 
Are consumer discretionary stocks oversold relative to consumer staples?
 
Source: @murphycharts  

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12. Business cycles matter the most for stocks over horizons up to 12 months.
 
Source: BCA Research  


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Rates

1. The US Treasury’s cash balances at the Fed have rebounded sharply after the debt ceiling was lifted. That’s pulling deposits out of the private sector.
 

 
As a result, bank reserves declined sharply in recent weeks. One could think of this process as a form of “quantitative tightening” …
 

 
… which some view as bearish for stocks.
 
Source: Deutsche Bank Research  

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2. The end of QE will sharply reduce demand for Treasuries relative to issuance.
 
Source: Pantheon Macroeconomics  
 
3. The Treasury curve continues to flatten, with the “pivot” point between five- and seven-year maturities.
 

 

 
The market sees the curve approaching inversion two years out (with the Fed’s hikes expected to slow the economy).
 

 
By the way, the yield curve seems to be tracking the employment-to-population ratio again.
 
Source: @EconBerger  

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4. The 10-year Treasury yield has established a new short-term trading range between 1.70% support and 1.80% resistance.
 
Source: FHN Financial  
 
5. The 10yr breakeven rate (inflation expectations) is back inside the range we saw last summer.
 


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Commodities

Here are the month-to-date returns for select commodity markets.
 

 
Nickel has been outperforming amid tight supplies.
 


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Energy

1. Is Brent crude about to test resistance at $90 again?
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. There is a divergence between crude oil inventory estimates across OECD economies vs. global levels.
 
Source: @jessefelder, Bloomberg   Read full article  
 
Source: Cornerstone Macro  

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3. 50% of Permian rig count is now controlled by private operators.
 
Source: Evercore ISI Research  
 
4. International energy stocks are trading nearly 35% cheaper than their US peers.
 
Source: PGM Global  
 
Energy companies outside of the US have higher margin growth.
 
Source: PGM Global  


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Cryptocurrency

1. It’s been a rough few days for crypto, with bitcoin now trading below $35k.
 

 
Ether continues to underperform.
 

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2. These types of drawdowns are not unusual even for established tokens.
 

 
Source: Danske Bank  

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3. Bitcoin’s correlation to stocks continues to climb.
 

 
4. Long liquidations in the crypto market accelerated last week, but the situation was not as severe as the early December crash.
 
Source: Coinglass  


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China

1. The renminbi continues to rise vs. USD.
 

 
Is it overvalued?
 
Source: BCA Research  

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2. The tightening rate differential favors the dollar.
 

 
3. Will an improvement in manufacturing PMI support a rebound in Chinese stocks? (2 charts)
 
Source: Alpine Macro  
 
Source: Danske Bank  

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4. Foreign holdings of government bonds keep rising.
 
Source: @acemaxx, @WSJecon   Read full article  
 
5. Based on BCA’s model, industrial profits are headed for contraction.
 
Source: BCA Research  
 
Will profit growth slow across the A-share market?
 
Source: BCA Research  


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Asia – Pacific

Omicron took a toll on service-sector activity this month.
 
Japan’s services PMI (back in contraction territory):
 

 
Australia’s services PMI:
 

 
Services dragged Australian composite PMI into contraction.
 
Source: IHS Markit  


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The Eurozone

1. The January PMI report was mixed.
 
While French service firms saw slower growth this month …
 

 
.. Germany’s services unexpectedly rebounded.
 

 
Germany’s manufacturing activity accelerated, also exceeding forecasts.
 

 
At the Eurozone level, the composite PMI was roughly in line with forecasts.
 

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2. How do former ECB officials see different audiences for the effectiveness of monetary policy?
 
Source: VOX-EU   Read full article  
 
How do they view forward guidance?
 
Source: VOX-EU   Read full article  


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Europe

1. The Swedish krona has been under pressure (in part due to weakness in growth stocks globally).
 

 
2. LNG tanker traffic from the US to Europe remains strong.
 
Source: @MattGarrett3, Bloomberg  
 
3. Time to restart nuclear reactor construction?
 
Source: @bopinion   Read full article  
 
4. This chart shows aging-related public spending projections across the EU.
 
Source: OECD   Read full article  


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The United Kingdom

1. The PMI report was a bit softer than expected, but growth generally remained stable this month.
 

 

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2. This chart shows social spending compared to 2020 levels.
 
Source: ING  
 
3. The UK and Ireland dominated the European private equity landscape last year, despite the impact of Brexit.
 
Source: PitchBook  
 
4. Next, we have some demographic data for the UK.
 
Source: The Economist   Read full article  


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Canada

1. Retail sales continued to climb in November.
 

 
2. Is inflation peaking?
 
Source: Numera Analytics  
 
3. This chart shows Canada’s exports by sector.
 
Source: @RichardDias_CFA  


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The United States

1. Let’s take a look at some inflation trends.
 
Fund managers see inflation peaking.
 
Source: BofA Global Research  
 
As demand for goods eases, we could see rapid declines in the CPI.
 
Source: Cornerstone Macro  
 
Market-implied CPI for the next 5-years declined below a short-term trend last week.
 
Source: FHN Financial  
 
Manufacturers’ prices paid (from ISM PMI) suggest that consumer inflation will begin easing in the months ahead.
 
Source: Cornerstone Macro  

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2. Regional Fed presidents are expected to be hawkish this year.
 
Source: Wells Fargo Securities  
 
3. The spread between new orders and inventory PMI indices points to some moderation in business activity ahead.
 
Source: Alpine Macro  
 
The OECD leading indicators also signal more modest growth in factory activity ahead.
 
Source: @jsblokland, @true_insights_   Read full article  

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4. Net domestic private investment has fallen over the past 40 years as imports rose.
 
Source: TS Lombard  
 
5. Real retail sales ex-gasoline fell below the pre-COVID growth trend (blue line is the six-month moving average).
 
Source: FHN Financial  
 
6. Despite tight labor markets, union membership continues to trend lower.
 
Source: Bloomberg   Read full article  


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Global Developments

1. Dry bulk shipping costs are now some 75% below the peak.
 

 
2. Speculative accounts sharply reduced their net US dollar bets.
 
Source: @markets   Read full article  
 
3. This chart shows the key contributions to global growth in 1980 and 2021.
 
Source: Mizuho Securities USA  


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Food for Thought

1. GM vs. Toyota vehicle sales:
 
Source: @WSJ   Read full article  
 
2. Established business ownership rates (% of adult population):
 
Source: The World Bank   Read full article  
 
3. Components of US population growth:
 
Source: Wells Fargo Securities  
 
4. Vaccine hesitancy in advanced economies:
 
Source: The Economist   Read full article  
 
5. Internet usage by region (2 charts):
 
Source: ITU   Read full article  
 
Source: ITU   Read full article  

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6. Quarterback efficiency:
 
Source: @benbbaldwin  

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