The Daily Shot: 26-Jan-22
• Equities
• Credit
• Rates
• Commodities
• Energy
• Cryptocurrencies
• Emerging Markets
• China
• Asia – Pacific
• The Eurozone
• The United Kingdom
• The United States
• Global Developments
• Food for Thought
Equities
1. Stocks remained under pressure on Tuesday. It’s been a rough start to the year.
Source: @C_Barraud, Bloomberg Read full article
2. Technicals suggest that we are close to a rebound.
• The S&P 500 and global “fear & greed” indicators are near extremes (2 charts).
Source: @DavidInglesTV
• Here is the share of S&P 500 members hitting 4-week lows.
Source: @TimmerFidelity
• The short end of the VIX curve (9 days vs. 1 month) has inverted substantially (which indicates risk aversion).
• Put option activity has been very elevated.
• The RSI indicators are in oversold territory.
Source: barchart.com
Here is the RSI for the QQQ/SPY ratio.
Source: @TheTerminal, Bloomberg Finance L.P.
• Deutsche Bank’s positioning indicator points to investor caution.
Source: Deutsche Bank Research
– Here is the systematic funds’ positioning.
Source: Deutsche Bank Research
Fundamentals, however, tell us that the selloff hasn’t been particularly severe.
• The Nasdaq 100 forward P/E ratio dipped below 25x, but these stocks are still pricey.
• The S&P 500 price has outpaced earnings and dividend growth since the start of the pandemic. The latest selloff hasn’t brought us back to “fundamentals.”
Source: Jack Ablin, Cresset Wealth Advisors
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3. How should we think about the Russia/Ukraine risk? History tells us that stocks tend to be resilient when it comes to geopolitical events.
Source: LPL Research
4. Intraday volatility has been much higher than close-to-close moves. As a result, standard volatility measures are understating market swings.
Source: Chris Murphy, Susquehanna International Group
Source: S&P Global Market Intelligence
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5. Microcaps (favored by the Reddit crowd) are in bear-market territory.
Source: @AndrewThrasher
And here is the drawdown for non-profitable tech.
Source: @LizAnnSonders
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6. ETF volume surged relative to individual stocks.
Source: Chris Murphy, Susquehanna International Group
7. Retail investors are doing some dip-buying.
Source: JP Morgan Research; @MichaelGoodwell
8. S&P 500 companies that have a track record of increasing dividends have been outperforming.
9. Risk-parity strategies have been lagging the S&P 500 for weeks. Not anymore.
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Credit
1. BB-rated corporate bonds have been underperforming (2 charts).
Source: Deutsche Bank Research
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2. This chart shows where we are with credit asset performance month-to-date (total returns). Treasuries are included for comparison.
3. Green bond issuance is expected to keep surging.
Source: @WSJ Read full article
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Rates
1. Have market-based inflation expectations peaked for now?
Source: BCA Research
2. Treasury market realized volatility hit the highest level since the COVID peak.
Source: Morgan Stanley Research
3. Here is the term SOFR rate vs. LIBOR.
Source: Deutsche Bank Research
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Commodities
Palladium has been outperforming.
h/t Walter
Is it overbought?
Source: barchart.com
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Energy
1. The outperformance of energy shares has been impressive (2 charts).
Source: @bespokeinvest Read full article
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2. The Brent curve is moving deeper into backwardation (negative slope), which signals tight market conditions.
• April – March spread:
Source: @HFI_Research
• May – April:
Source: @HFI_Research
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Cryptocurrencies
1. Cryptocurrencies are starting to stabilize after the recent sell-off.
Source: FinViz
2. Bitcoin’s market cap relative to the total crypto market cap has risen so far this year, which could signal a “flight to safety” in crypto similar to 2018.
Source: CoinDesk Read full article
3. Bitcoin’s market value relative to its realized value (MVRV) is not yet at an extreme low, suggesting BTC is only slightly below “fair value.”
Source: @coinmetrics
4. A majority of financial and tech firms surveyed by Arca and Coalition Greenwich have been active in digital assets/blockchain for at least three years.
Source: Arca; Coalition Greenwich Read full article
5. The Coinbase stock rout continues.
Source: @markets Read full article
6. Binance dominates crypto spot exchange volumes.
Source: The Block
7. Market participants are concerned about a severe shakeout in the DeFi space.
Source: CoinMarketCap Further reading
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Emerging Markets
1. Mexico’s economic activity ticked higher in November but remained depressed.
2. Brazil’s consumer confidence has been softening.
The government’s tax collections finished the year on a strong note.
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3. Are LatAm central banks nearing the end of their hiking cycle?
Source: Numera Analytics
4. EM policy rates have returned near pre-pandemic levels.
Source: TS Lombard
Which central banks are behind the curve?
Source: Oxford Economics
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5. Emerging markets are home to a majority of the best-performing stocks over 2020 and 2021.
Source: Goldman Sachs Asset Management
6. High-beta EM debt will be increasingly vulnerable to rising Treasury yields.
Source: TS Lombard
7. This chart shows real sovereign bond yields across select economies.
Source: Oxford Economics
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China
1. How long will Beijing tolerate the renminbi’s strength given its impact on financial conditions? The first panel shows CNY vs. USD and the second is CNY vs. a basket of currencies.
The renminbi is also outperforming other EM currencies.
Source: @acemaxx, @MorganStanley
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2. Stocks are near bear-market territory.
3. Beijing’s letting developers tap presale funds is giving some stressed firms a lifeline.
Source: ANZ Research
Source: South China Morning Post Read full article
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4. China’s government bonds have been outperforming other assets around the world, including stocks.
Source: Gavekal Research
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Asia – Pacific
1. Growth in South Korean and Taiwanese exports has weakened amid slowing global manufacturing conditions.
Source: Danske Bank
2. COVID cases are surging in Japan.
3. Australian stocks look oversold.
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The Eurozone
1. Just as we saw with the ZEW indicator (#2 here), the Ifo index shows improving business sentiment in Germany this month.
Source: ifo Institute
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2. Spain’s PPI climbed above 35%.
3. What will the ECB’s quantitative tightening look like?
Source: ING
4. Equity risk premiums remain elevated.
Source: BCA Research
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The United Kingdom
1. The CBI report showed that strong industrial orders carried over into January.
• But business sentiment deteriorated.
• Inventories were extraordinarily low going into the year-end.
• The index of selling prices is holding near extreme levels.
Source: Reuters Read full article
• The CBI report points to robust manufacturing investment ahead.
Source: Pantheon Macroeconomics
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2. Levies to pay for policy initiatives represent a substantial part of UK retail electricity bills.
Source: Oxford institute for Energy Studies
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The United States
1. Consumer confidence ticked lower in January but was firmer than expected.
Sentiment was supported by robust employment trends.
Source: Mizuho Securities USA
• The labor differential continues to signal strength in the jobs market.
But income expectations have worsened.
Source: The Daily Feather
The two indices have diverged sharply.
Source: @RenMacLLC
• Sentiment has been outpacing mobility/retail activity.
Source: Wells Fargo Securities
• Buying conditions for vehicles jumped in January.
• COVID cases appear to be peaking. Will it be enough to offset the stock market rout and improve sentiment next month?
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2. Next, we have some updates on the housing market.
• The pace of home price appreciation strengthened a bit in November.
• Will housing starts peak this year?
Source: Wells Fargo Securities
• Rising equity in homes has not led to increases in home equity borrowing.
Source: TS Lombard
• Apartment occupancy rates started the year on a strong note.
Source: Evercore ISI Research
• Lending standards for multi-family properties have loosened considerably.
Source: Â Park Madison Partners
• Homebuilders view their inventories as very tight.
Source: Evercore ISI Research
• Many Millennials are planning to buy a home soon.
Source: @AliWolfEcon
• Here is the housing “P/E” ratio (see the comment from Wells Fargo below).
Source: Wells Fargo Securities
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3. The Richmond Fed’s manufacturing index pulled back this month.
• Hiring stalled.
• Manufacturers’ wage expectations eased somewaht.
• Price gains remain at extreme levels.
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4. Most investors surveyed by Deutsche Bank expect a recession within the next 2-3 years.
Source: Deutsche Bank Research
But recent business cycles have been much longer.
Source: Deutsche Bank Research
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Global Developments
1. How would a sharp slowdown in China impact the rest of the world?
Source: OECD Read full article
2. This chart shows just how cyclical the semiconductor industry is.
Source: ANZ Research
3. The global trade-to-output ratio has been remarkably flat since the financial crisis.
Source: BCA Research
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Food for Thought
1. Why do employees want to quit?
Source: PlanBeyond Read full article
2. States raising the minimum wage in 2022:
Source: @axios Read full article
3. Active Web 3.0 developers:
Source: @JayHao8, @ElectricCapital Read full article
4. BlackBerry’s revenue over time:
Source: @chartrdaily
5. Labels applied to the people who stormed the US Capitol:
Source: @YouGovAmerica Read full article
6. Personal experience with COVID:
Source: Data for Progress Read full article
7. Will Russia invade Ukraine?
Source: YouGov
8. Three common activities, by age:
Source: @graykimbrough
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