The Daily Shot: 02-Dec-22
• The United States
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Commodities
• Equities
• Rates
• Global Developments
• Food for Thought
The United States
1. Let’s begin with some updates on the US consumer.
• Consumer spending remains robust despite elevated prices, …
Source: @WSJ Read full article
… supporting economic growth.
Source: BCA Research
– Goods still dominate spending (2 charts).
Source: Chart and data provided by Macrobond
Source: @WhiteHouseCEA
– Here is the breakdown by category for October (nominal).
Source: Oxford Economics
• Consumer savings continue to slow (2 charts).
Source: @jasonfurman
Savings are expected to keep falling as consumers spend their cash pile. JP Morgan sees excess savings depleted by mid-2023.
Source: JP Morgan Research; @carlquintanilla
Here is a forecast from Deutsche Bank.
Source: Deutsche Bank Research
• Real incomes (ex. government payments) continue to climb.
• Credit card debt has risen sharply this year (which has generated a lot of hype in the media), …
… but it remains well below pre-COVID levels as a share of disposable income.
• Households are better positioned to withstand higher rates.
Source: Mizuho Securities USA
• Households reallocated a large portion of their liquid assets into cash/checking accounts since the start of the pandemic (from money market funds, etc.).
Source: Nancy Vanden Houten, Oxford Economics
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2. Next, we have some updates on inflation.
• The October PCE inflation measure was a bit lower than expected. But inflation remains elevated.
Source: @axios Read full article
Below is the core PCE index.
– Here is the core PCE breakdown.
Source: The Real Economy Blog Read full article
– This is a forecast from Pantheon Macroeconomics.
Source: Pantheon Macroeconomics
– And here is Goldman’s forecast for the core PCE inflation.
Source: Goldman Sachs
– Easing supply constraints should alleviate inflationary pressures.
Source: Goldman Sachs
– Lower freight prices point to softer goods inflation.
Source: @AndreasSteno
• Rent inflation continues to moderate.
Source: Apartment List
• Food inflation should ease over the next few months.
Source: Piper Sandler
• Healthcare and housing weight differences created a substantial gap between the CPI and PCE inflation measures (2 charts).
Source: @markets, @readep, @boes_ Read full article
Source: Gavekal Research
• Near-term inflation expectations remain elevated.
• The focus in the November payrolls report will be on wages.
Source: BofA Global Research
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3. Jobless claims declined again, showing persistent strength in the labor market.
However, job cuts jumped in November.
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4. The ISM manufacturing PMI dipped into contraction territory for the first time since early 2020.
Source: @TheTerminal, Bloomberg Finance L.P.
• The ISM index has now almost converged with this stock market indicator.
Source: @TheTerminal, Bloomberg Finance L.P.
• Demand is falling.
• Hiring has stalled.
• Customer inventories are stabilizing.
• Costs are now falling, …
… which should help ease goods inflation (2 charts).
Source: Oxford Economics
Source: Pantheon Macroeconomics
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5. A rate hike of 50 basis points is priced in for this month and roughly another 50 bps for next year.
Source: @ANZ_Research
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The United Kingdom
1. Home prices declined sharply in November.
2. How will households change their spending patterns in response to surging prices (by income)?
Source: @bankofengland Read full article
3. This chart shows UK energy spending.
Source: Longview Economics
4. It’s “make or break” time for the pound.
• GBP/USD:
Source: @TheTerminal, Bloomberg Finance L.P.
• EUR/GBP:
Source: @TheTerminal, Bloomberg Finance L.P.
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The Eurozone
1. Let’s begin with some updates on Germany.
• Retail sales tumbled in October.
• Retailers continue to face supply problems.
Source: ifo Institute
• German consumer saving intentions continue to rise as the business cycle contracts.
Source: Deutsche Bank Research
• How much support has been provided for the household sector?
Source: Deutsche Bank Research
• German pension funds are massively underfunded, and returns have fallen sharply below real economic growth.
Source: Gavekal Research
• German property prices remain under pressure, although new building prices have ticked up.
Source: Commerzbank Research
• Housing is increasingly unaffordable in Germany because of much higher financing costs.
Source: Commerzbank Research
• Commerzbank expects the German 10-year mortgage rate to settle at 4.5%.
Source: Commerzbank Research
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2. The euro-area unemployment rate hit a record low in October. Is this the bottom?
Here is Italy’s unemployment rate.
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3. Dutch manufacturing contraction accelerated in November.
Source: S&P Global PMI
4. The euro remains correlated with the stock market.
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Japan
1. The Q3 CapEx growth surprised to the upside.
2. Vehicle sales are back down to last year’s levels.
3. Dollar-yen is at the 200-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
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Asia – Pacific
1. South Korea’s core CPI remains stubbornly high.
South Korea’s weakening exports signal falling global demand (2 charts).
Source: ING
Source: Pantheon Macroeconomics
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2. Australia’s lithium exports accelerated as prices surged.
Source: @ANZ_Research
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China
1. The downward pressure on the renminbi is over.
2. The Hong Kong dollar continues to climb as foreign capital flows back in.
3. China’s COVID-19 policy is the most stringent in the world.
Source: BCA Research
4. This chart shows property developer defaults and debt maturity extensions.
Source: Gavekal Research
5. Chinese stocks appear cheap, but not as much compared to 2008.
Source: BCA Research
The stock/bond ratio has been declining.
Source: BCA Research
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Emerging Markets
1. Brazil’s manufacturing activity is tumbling.
Source: S&P Global PMI
• The Q3 GDP growth was below expectations but still strong.
• The trade surplus is very high for this time of the year.
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2. Next, we have some updates on Chile.
• Economic activity is below last year’s levels but still robust.
• Manufacturing output is down 9% vs. last year.
• Copper production is recovering.
• Retail sales bounced in October.
• Business sentiment remains soft.
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3. Mexican manufacturing activity is still not growing.
Source: S&P Global PMI
Remittances hit a record high.
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4. Colombia’s manufacturing sector is struggling.
Source: S&P Global PMI
5. Turkey’s manufacturing is in recession as demand sinks.
6. South Africa’s bond yields jumped amid political uncertainty.
• Manufacturing is back in growth mode.
• Vehicle sales surged last month.
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Commodities
1. Gold and silver broke through key levels. (2 charts)
Source: Aazan Habib, Paradigm Capital
Source: Aazan Habib, Paradigm Capital
But gold hit resistance at another key level.
Source: @TheTerminal, Bloomberg Finance L.P.
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2. US wheat futures are at support.
3. US lumber prices are back at pre-COVID levels as the housing market slumps.
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Equities
1. JP Morgan sees much lower earnings next year than the consensus estimate.
Source: JP Morgan Research; @carlquintanilla
2. Market forecasters haven’t been this uncertain since 2009.
Source: @markets, @luwangnyc Read full article
3. This chart shows global large-cap market returns in November.
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital
4. Bloomberg’s World Index is increasingly dominated by US shares.
Source: Evercore ISI Research
5. BofA private clients have been moving into income assets and defensives.
Source: BofA Global Research
6. Growth stocks have underperformed massively on a year-over-year basis.
h/t @_rob_anderson, @NDR_Research
7. Cyclical stocks are holding support relative to defensives.
Source: Alpine Macro
But cyclical stocks are more vulnerable to downward EPS revisions during recessions.
Source: Citi Private Bank
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8. Energy, materials, and industrials have strong odds of outperformance after manufacturing indicators are in contraction, likely pricing in a recovery phase.
Source: Denise Chisholm; Fidelity Investments
And supportive valuations could offer strong alpha potential.
Source: Denise Chisholm; Fidelity Investments
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9. Trading volumes have rebounded.
Source: Chris Murphy, Susquehanna International Group
10. VIX is below 20.
11. What returns should we expect over the next decade, given current valuations?
Source: Merrill Lynch
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Rates
1. The 10-year Treasury yield hit support at 3.5%.
Source: @TheTerminal, Bloomberg Finance L.P.
2. The 10-year yield is now firmly below the fed funds rate.
Source: Tradeweb
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Global Developments
1. The dollar index dipped below the 200-day moving average.
2. Here is a look at November and year-to-date performance across assets. It was a rebound month, except for oil.
Source: Deutsche Bank Research
3. Global manufacturing activity is firmly in contraction territory.
Source: S&P Global PMI
Here are the PMI indicators by country.
Source: S&P Global PMI
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Food for Thought
1. Tesla’s financials at IPO and now:
Source: Visual Capitalist Read full article
2. E-commerce companies’ revenues:
Source: Genuine Impact
3. Sam Bankman-Fried companies’ relationships:
Source: @BBGVisualData Read full article
4. Global household wealth:
Source: Visual Capitalist Read full article
5. Russia selling stolen Ukrainian grain to global buyers:
Source: @WSJ Read full article
6. How will climate change impact crop yields?
Source: The Economist Read full article
7. US voting frequency:
Source: @CivicScience
8. World Cup 2022 match durations:
Source: @OpenAxisHQ Read full article
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Have a great weekend!
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