Posted on by The Daily Shot Editor: Lev Borodovsky

Household cash exceeds debt for the first time in 30 years

The Daily Shot: 20-Apr-22
• The United States
• Canada
• Europe
• Japan
• Australia
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. St. Louis Fed President James Bullard brought up the possibility of a 75 bps rate hike.
 
Source: Bloomberg   Read full article  
 
The market responded by taking the expected number of 25 bps hikes in May just above two, …
 

 
… and the total rate increase in 2022 slightly above 2.5%.
 

 
• The 2-year Treasury yield surpassed 2.6%.
 

 
• The 10-year yield is nearing 3%.
 

 
• And the 10-year inflation-linked Treasury yield (real rate) has moved into positive territory for the first time since March of 2020. As we mentioned before, rising real rates tend to be a headwind for growth stocks.
 

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2. The gap between the start of a hiking cycle and a recession tends to be about two years.
 
Source: Deutsche Bank Research  
 
3. On average, US economic data have been surprising to the upside in recent weeks.
 

 
But leading indicators point to slowing economic growth.
 
Source: Alpine Macro  

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4. Job openings posted on Indeed appear to have peaked.
 
Source: @AE_Konkel, @Indeed  
 
5. Household cash exceeds debt for the first time in 30 years.
 
Source: Deutsche Bank Research  
 
6. Next, we have some updates on the housing market.
 
• The rise in mortgage rates has shuttered the recent refinancing wave, leaving a majority of homeowners with rates below the prevailing 5% rate.
 
Source: RiskSpan   Read full article  
 
• Residential construction activity in March exceeded forecasts, boosted by a surge in multifamily starts (3rd panel).
 

 
Here are the trends in construction permits.
 

 
• The number of multifamily units under construction continues to swell.
 

 
• Housing starts have diverged from completions amid construction delays.
 
Source: Mizuho Securities USA  
 
• Here is the number of housing units that have been authorized but not started.
 
Source: Wells Fargo Securities  

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7. The federal government’s interest costs will move sharply higher from here.
 
Source: Yardeni Research  

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Canada

1. Existing home sales dropped in March.
 

 
2. Housing starts remain robust.
 

 
3. Risks to the Canadian dollar are skewed to the upside.
 
Source: Alpine Macro  

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Europe

1. Bund futures are experiencing the worst drawdown on record.
 

 
2. Producer price gains have accelerated across Europe.
 
• Portugal:
 

 
• Denmark:
 

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3. Norway’s trade surplus has gone vertical as energy prices surged.
 

 
4. Finally, here is a look at the EU’s asylum applications backlog.
 
Source: EDJNet   Read full article  

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Japan

1. The 10yr JGB is trading near 0.25% (yield), …
 

 
… prompting the BoJ to buy bonds again.
 
Source: Bloomberg   Read full article  

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2. Dollar-yen broke above its 2-decade resistance level.
 
Source: barchart.com  
 
Here is Japan’s real effective exchange rate.
 
Source: Scotiabank Economics  

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3. Japan’s exports hit a record high, …
 

 
… but elevated energy prices have been widening Japan’s trade deficit.
 

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Australia

1. The 10-year bond yield is nearing the 2015 peak.
 

 
2. The benchmark S&P-ASX 200 stock index is at resistance.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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China

1. The PBoC once again set the renminbi fixing well below forecasts. Beijing may attempt to weaken the currency rather than cutting rates to stimulate growth.
 

 
The renminbi dropped sharply.
 

 
And options traders are betting on further weakness ahead.
 

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2. Port congestion in Shanghai is at extreme levels (the map shows cargo and container vessels).
 
Source: Radu Palamariu  
 
Truck activity in Shanghai has collapsed.
 
Source: Bloomberg   Read full article  

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3. Housing transactions have been trending lower.
 
Source: Gavekal Research  
 
Source: Longview Economics  
 
And residential land sales are weakening.
 
Source: Gavekal Research  

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4. Passenger electric vehicle sales volume grew strongly despite the global shortage of semiconductors used in automobiles.
 
Source: Fitch Ratings  

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Emerging Markets

1. Russia’s stocks show no signs of a rebound.
 

 
2. Here is the distribution of EM sovereign ratings over time.
 
Source: Fitch Ratings  
 
3. This scatterplot shows the core CPI (3-month changes) vs. the deviation of economic output from trend.
 
Source: IIF  

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Cryptocurrency

1. This chart shows the distribution of profits and losses among bitcoin traders at various price levels, according to data recorded on the blockchain.
 
Source: @glassnode  
 
2. A bulk of bitcoin’s trading volume has occurred within the $32K-$50K price range over the past year, which is also the average cost basis for short-term holders. Will we see a breakout/breakdown soon?
 
Source: CoinDesk   Read full article  
 
3. Bitcoin will undergo its fourth scheduled halving in May 2024, which is a key feature of the coin’s programmatic monetary policy. Theoretically, halving events precede a rise in price as supply is reduced (so long as demand accelerates).
 
Source: Coin Metrics  
 
4. Bitcoin’s transaction fees are near all-time lows, which could be the result of more efficient use of block space or a decline in economic use of the blockchain network.
 
Source: Coin Metrics  
 
5. Crypto investment products saw the second week of outflows, although multi-asset funds have seen consistent inflows (2 charts).
 
Source: CoinShares   Read full article  
 
Source: CoinShares   Read full article  

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6. Algorithmic (or non-collateralized) stablecoins are gaining in popularity. Algos attempt to keep the value stable by adjusting the number of tokens in circulation based on demand.
 
Source: @WSJ   Read full article   Further reading  
 
7. Crypto-focused stocks have been underperforming cryptocurrencies.
 
Source: @WSJ   Read full article  

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Commodities

1. Precious metals ETF inflows have been massive this year. But given the sharp increase in real rates and the US dollar rally, gold could be vulnerable if fund flows reverse course.
 

 
2. Surging agricultural commodity prices boosted agribusiness shares.
 
Source: S&P Global Market Intelligence  
 
3. Here are the largest exporters of key grains.
 
Source: Fitch Ratings  

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Equities

1. Stocks rallied on Tuesday, with market gains across the board. Travel-related shares got a boost from a court ruling related to mask mandates (2 charts).
 
Source: @WSJ   Read full article  
 

 

 
But futures are lower this morning after Netflix results disappointed.
 

 
Source: @TSOH_Investing  

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2. Rising real yields put the tech mega-cap COVID-era outperformance at risk. Here is the relative performance of the largest six stocks (vs. the rest of the S&P 500) and the 10yr inflation-linked Treasury yield.
 
Source: Alpine Macro  
 
3. The average S&P 500 stock has already experienced a bear market decline of at least 20%.
 
Source: Spinnaker Trust   Read full article  
 
4. Investors tend to sell stocks ahead of Tax Day (to make tax payments). Smooth sailing from here?
 
Source: JP Morgan Research; @carlquintanilla  
 
5. Below is a look at equity returns during Fed hiking cycles.
 
Source: Deutsche Bank Research  
 
6. There is a disconnect between cyclical sectors (relative performance) and long-term inflation expectations. The same holds true for small caps.
 
Source: Alpine Macro  
 
7. This chart shows CAPE estimates (valuations) going back to 1882.
 
Source: TS Lombard  

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Credit

1. Let’s take a look at some performance trends over the past twelve months.
 
• Corporate high-yield vs. investment-grade:
 

 
• Leveraged loans (outperforming due to floating coupon):
 

 
• BDCs (invest mostly in loans):
 

 
• Corporate high-yield vs. high-yield munis:
 

 
By the way, here is Bloomberg’s muni bond index.
 

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2. Yields across the fixed-income universe are now above longer-term averages.
 
Source: Lawrence Gillum, LPL Research  

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Rates

1. There are two ways to show real Treasury yields.
 
Source: Deutsche Bank Research  
 
2. After years of disinflationary pressures, inflation risks are once again skewed to the upside.
 
Source: Deutsche Bank Research  
 
3. The term premium curve has inverted, contributing to a flatter Treasury yield curve.
 
Source: PGM Global  

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Global Developments

1. Here is a way to evaluate funding sources for currency carry trades (higher numbers = “better” currency).
 
Source: Bloomberg   Read full article  
 
2. The massive monetary tightening this year will put pressure on economic growth.
 
Source: BofA Global Research; @Scutty  
 
The IMF has downgraded its GDP projections (2 charts).
 
Source: Bloomberg   Read full article  
 
Source: IMF   Read full article  

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3. Which countries’ CPI is most sensitive to food prices?
 
Source: Fitch Ratings  
 
4. Inflation has been exceeding central banks’ targets.
 
Source: IIF  

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Food for Thought

1. New omicron variants in South Africa (BA.4 and BA.5):
 
Source: @Tuliodna  
 
2. As cybersecurity threats continue to increase, so will cybersecurity spending.
 
Source: McKinsey & Company   Read full article  
 
3. Recording music industry revenues:
 
Source: Statista  
 
4. Taking in Ukrainian refugees:
 
Source: New Statesman   Read full article  
 
5. Expelling Russian spies:
 
Source: The Economist   Read full article  
 
6. Airline sector recovery:
 
Source: @financialtimes   Read full article  
 
7. Business applications during the pandemic:
 
Source: @stlouisfed   Read full article  
 
8. Consumer spending on personal-care products and services:
 
Source: @WSJ   Read full article  
 
9. Comet nucleus sizes:
 
Source: @physorg_com   Read full article  

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