US domestic shipping activity is slowing

The Daily Shot: 19-Jul-22
The United States
Canada
The United Kingdom
Europe
Japan
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Homebuilder sentiment is crashing as demand deteriorates.
 

 
What does it mean for new home sales?
 
Source: Pantheon Macroeconomics  
 
Here is last year’s construction “heat map.” These could be the areas that are most vulnerable to the impending slowdown in residential construction.
 
Source: @axios   Read full article  
 
Consumers are becoming less certain that it’s a good time to sell a house.
 

 
Consumers now expect price declines over the next 12 months.
 

 
The average mortgage size has been falling as buyers shift to lower-price homes.
 
h/t Erica Adelberg, Bloomberg Intelligence  
 
Refi activity continues to shrink.
 
Source: AEI Center on Housing Markets and Finance  
 
It could take roughly a decade for first-time homebuyers to save up for a 10%-20% downpayment, …
 
Source: S&P Global Ratings  
 
… as affordability deteriorates.
 
Source: Goldman Sachs  
 
This has been the second longest housing boom since 1976.
 
Source: AEI Center on Housing Markets and Finance  
 
Price gains have been unusually broad.
 
Source: Quill Intelligence  
 
More housing deals are falling through.
 
Source: Redfin  
 
The percentage of sIngie-family homes purchased by investors has been rising.
 
Source: Calculated Risk  

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2. Next, let’s take a look at supply stress data.
 
There have been fewer mentions of “shortage” in the Fed’s Beige Book.
 
Source: Bloomberg   Read full article  
 
Companies are increasingly talking about re-shoring to avoid supply delays.
 
Source: BofA Global Research  
 
Container shipping costs continue to moderate.
 

 
Here is a quote from Vanda Research.

Despite San Pedro Bay ports reducing the vessel backlog, metrics related to the fluidity of internal port operations have been deteriorating, such as the share of long-dwelling containers spiking.

Source: Vanda Research  
 
Domestic shipping activity is slowing.
 
Source: Cass Information Systems  
 
This chart shows truck-load shipment demand.
 
Source: @DiMartinoBooth, @FreightAlley, Morgan Stanley Research  
 
Shipping inflation is still very high but peaking.
 
Source: Cass Information Systems  

——————–

 
3. The NY Fed’s regional service-sector report showed business activity stalling.
 


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Canada

1. Housing starts remain strong.
 

 
2. Elevated energy prices boosted Canada’s terms of trade.
 
Source: Scotiabank Economics  
 
3. Canada is ramping up immigration targets to boost economic growth.
 
Source: Scotiabank Economics  


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The United Kingdom

1. The June payrolls report was disappointing.
 

 
The unemployment rate held at 3.8% (March-May period).
 

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2. Here is the UK’s Beveridge Curve.
 
Source: BIS   Read full article  
 
3. Business confidence has weakened.
 
Source: @SPGlobalPMI, @AccentureUK   Read full article  
 
4. Confidence in the BoE has collapsed.
 
Source: Pantheon Macroeconomics  


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Europe

1. The euro area’s working-age population is expected to decline, which could weigh on economic growth.
 
Source: Danske Bank  
 
There is the potential for greater inclusion in the labor market as more people retire later and life expectancy grows. Also, some countries are seeing workforce growth from immigration.
 
Source: Danske Bank  

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2. Piper Sandler’s model shows economic activity and earnings deteriorating in the Eurozone.
 
Source: Piper Sandler¬†  
 
Fund managers are very bearish.
 
Source: BofA Global Research  

——————–

 
3. Temperatures are hitting record highs.
 
Source: coolwx.com  
 
4. Europe is on edge.
 
Source: S&P Global Commodity Insights  


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Japan

The yen is deeply oversold but not as extreme compared with 2014.
 
Source: MRB Partners  
 
Will the Invesco Japanese Yen ETF (FXY) hold long-term support?
 


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China

1. A boost in fiscal stimulus is on the way.
 
Source: Barclays Research  
 
2. Real estate has been a drag on growth.
 
Source: Pantheon Macroeconomics  
 
By the way, China’s property market is probably the largest asset class in the world.
 
Source: Goldman Sachs; @Mayhem4Markets  

——————–

 
3 Lockdowns are easing.
 
Source: Gavekal Research  
 
Source: Numera Analytics  


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Emerging Markets

1. The Pakistani rupee continues to tumble despite bailout support, amid increased political uncertainty.
 

 
Source: The Washington Post  
 
Source: @financialtimes   Read full article  

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2. The Argentine peso is crashing in the “unofficial” market. This chart shows the number of pesos it takes to buy one dollar.
 

 
3. Fitch Ratings sees net EM downgrades slowing.
 
Source: Fitch Ratings  


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Cryptocurrency

1. Bitcoin is trading in the upper end of its recent range.
 

 
2. Crypto investment funds saw inflows totaling $12 million last week, driven by short-bitcoin products (2 charts).
 
Source: CoinShares   Read full article  
 
Source: CoinShares   Read full article  
 
3. Canadian crypto funds saw the most outflows last week.
 
Source: CoinShares   Read full article  


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Commodities

1. Speculative accounts have been cutting their bets on precious metals.
 

 
2. Copper appears to be oversold.
 
Source: @StrategasRP  
 
What are the drivers of the bear market in copper?
 
Source: @NumeraAnalytics  

——————–

 
3. Commodities have declined from extreme overbought levels.
 
Source: MRB Partners  


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Energy

1. Speculative accounts have been cutting their bets on NYMEX crude (WTI).
 

 
2. Numera Analytics expects Brent oil to remain above $70/bbl over the next two to three years as low investment limits a supply response (2 charts).
 
Source: Numera Analytics  
 
Source: Numera Analytics  

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3. This chart compares the price momentum of key energy segments versus the broader stock market over the past 12 weeks. Solar has improved while fossil fuels have weakened (see here for more relative rotation graphs).
 
Source: Piper Sandler; RRG Research  
 
4. So far, Russia’s physical oil production has barely declined …
 
Source: Numera Analytics  
 
… as price-sensitive buyers shifted to Russian oil.
 
Source: Numera Analytics  

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5. Texas grid demand hit a record high.
 
Source: @naurtorious, @markets   Read full article  


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Equities

1. Analysts continue to downgrade next year’s earnings projections.
 

 
Much will depend on the economic trajectory, …
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
… making markets jittery.
 
Source: @markgurman, @NewsyNick, @technology   Read full article  
 
Here is the history of S&P 500 earnings estimates.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  

——————–

 
2. Easing supply stress should bring corporate margins back to more “realistic” levels.
 
Source: Pantheon Macroeconomics  
 
3. BofA’s survey of fund managers shows extreme risk aversion.
 
Source: BofA Global Research  
 
Cash levels:
 
Source: BofA Global Research  
 
Equity allocations:
 
Source: BofA Global Research  
 
Overweight defensives:
 
Source: BofA Global Research  

——————–

 
4. We’ve had a sharp rotation out of energy and materials.
 
Source: BofA Global Research  
 
5. The US stock/bond ratio is starting to peak.
 
Source: MRB Partners  
 
6. The market isn’t too concerned about surging labor costs.
 

 
7. How do markets perform after midterm elections?
 
Source: LPL Research  
 
8. Tech stocks peaked shortly after Facebook’s name change to Meta.
 
Source: Koyfin  


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Credit

1. According to Deutsche Bank, the ratings drift in US and European high-yield credit appears to be turning, which points to a downgrade cycle toward the end of this year as the economy slows.
 
Source: Deutsche Bank Research  
 
2. Which sectors are vulnerable to defaults?
 
Source: S&P Global Ratings  
 
3. Muni funds have seen substantial outflows.
 
Source: Morningstar  
 
A higher share of munis held by funds makes the market more volatile.
 
Source: @WSJ   Read full article  

——————–

 
4. Commercial mortgage-backed securities (CMBS) delinquency rates have continued to decline for all property types but remain elevated for hotel and retail properties that were stressed by the pandemic.
 
Source: Wells Fargo Securities  


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Rates

1. The bills-OIS spread suggests that market risk aversion may be easing.
 

 
2. What’s next for US real yields?
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. A larger portion of the Treasury curve is inverted.
 
Source: Chart and data provided by Macrobond  


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Global Developments

1. ATAC’s Risk-on/Risk-off index ticked higher.
 
Source: Piper Sandler¬†  
 
2. Central bank rake hikes have accelerated (2 charts).
 
Source: BofA Global Research  
 
Source: @acemaxx, @FT   Read full article  
 
But markets are pricing rate hike overshoots (hikes followed by cuts).
 
Source: PGM Global  

——————–

 
3. Easing supply stress should trigger moderation in producer price gains.
 
Source: @NumeraAnalytics  


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Food for Thought

1. US robot prices and stock of robots per thousand manufacturing workers:
 
Source: Federal Reserve Bank of San Francisco   Read full article  
 
2. USDA food and nutrition assistance spending:
 
Source: @USDA_ERS   Read full article  
 
3. Importance of issues to Americans’ vote for Congress:
 
Source: Gallup   Read full article  
 
4. Foreign-born population in the US:
 
Source: The New York Times   Read full article  
 
5. Population projections by region:
 
Source: United Nations  
 
Source: Statista  

——————–

 
6. According to the Toronto Zoo, …

The white spots on the back of tiger’s ears are called “eye spots” or “predator spots”. These spots are believed to function as false eyes as well as to make it look larger to any predator approaching from behind. This is particularly helpful in keeping cubs safe.

Source: @BrianRoemmele  


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