Analysts are divided on home price trajectory in 2023

The Daily Shot: 08-Dec-22
The United States
Canada
The United Kingdom
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Alternatives
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. Consumer credit growth remains elevated.
 

 
Credit card debt surged this year.
 

 
That debt buys a lot less these days.
 

 
Credit card debt remains below pre-COVID levels as a share of disposable income.
 

 
Credit card rates have been surging.
 
Source: Capital Economics  
 
Growth in student debt is starting to recover.
 

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2. Wholesale used-car prices are down 14% vs. 12 months ago.
 
Source: CNBC   Read full article  
 

 
By the way, Carvana’s share price has collapsed as the used car market faces some headwinds.
 
Source: CNBC   Read full article  
 

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3. Next, we have some updates on the housing market.
 
Mortgage applications remain soft.
 

 
This chart shows mortgage rate locks.
 
Source: AEI Housing Center  
 
CoreLogic still expects year-over-year home price changes to remain in positive territory next year.
 
Source: CoreLogic  
 
The AEI Housing Center expects a very different outcome.
 
Source: AEI Housing Center  
 
US homes remain overvalued.
 
Source: Andrew Reading, BI, @TheTerminal, Bloomberg Finance L.P.  
 
Here is a comment from Goldman on the housing market.
 
Source: Goldman Sachs; @GratkeWealth  
 
The current housing market reflects a similar demand/supply imbalance as the 1970s. (2 charts)
 
Source: SOM Macro Strategies  
 
Source: SOM Macro Strategies  
 
Mortgage delinquency rates remain low.
 
Source: Calculated Risk  
 
This chart shows new home sales during Fed rate hike cycles.
 
Source: BlackRock Investment Institute  
 
Adjustable-rate mortgages remain a small portion of total mortgage balances.
 
Source: Mizuho Securities USA  


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Canada

The BoC hiked by 50 bps.
 

 
Markets saw the BoC’s comments as being on the hawkish side. Rate expectations climbed, with 50 bps now fully priced in for January.
 
Source: Scotiabank Economics  
 

 
Here are the changes in bond yields.
 


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The United Kingdom

1. The RICS report signaled trouble for the housing market.
 
Source: Reuters   Read full article  
 

 
Here is what it means for the official home price index.
 
Source: Pantheon Macroeconomics  
 
An alternative measure of home prices showed a sharp decline last month.
 
Source: @Lvieweconomics  

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2. Labor activity is on the rise.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. Investment boosted the Q3 GDP growth (2 charts).
 
Source: Pantheon Macroeconomics  
 

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2. Wage growth is driving services inflation.
 
Source: @ANZ_Research  
 
3. The ECB partially unwound the support it gave to Eurozone “periphery” bonds in the summer.
 
Source: ING  
 
3. Spain’s housing prices are massively lagging behind other advanced economies.
 
Source: Arcano Economics  
 
4. European stocks have been outperforming the US (2 charts).
 

 
Source: @WSJ   Read full article  
 
ETF flows have picked up.
 
Source: @WSJ   Read full article  
 
Earnings expectations remain upbeat.
 

 
Valuations are attractive relative to the US.
 
Source: @StephaneDeo, h/t @topdowncharts  


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Europe

1. Let’s begin with Sweden.
 
Services growth is slowing.
 

 
Private sector output continued to climb in October.
 

 
But industrial orders were softer.
 

 
Household consumption is back at pre-COVID levels.
 

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2. Next, we have some updates on Norway.
 
The current account surplus exploded this year as energy prices and deliveries surged.
 

 
Manufacturing output remains robust.
 

 
The output gap is narrowing.
 
Source: Nordea Markets  
 
Expected business conditions have deteriorated.
 

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3. Swiss FX reserves continue to fall as the SNB lightens the load.
 

 
The SNB’s profit tumbled as stocks, bonds, and the euro (in SNB’s portfolio) took a hit in 2022.
 
Source: Pictet Wealth Management  


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Asia – Pacific

1. Japan’s trade gap remains wide.
 

 
The current account swung into deficit for the first time since 2014.
 

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2. Taiwan’s exports deteriorated last month.
 

 
3. South Korea’s household credit growth is now negative on a year-over-year basis.
 

 
4. Australia’s trade surplus remains elevated.
 


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China

1. FX reserves are rebounding.
 

 
2. The RMB trading volume continues to climb, with more institutions participating. Volatility has risen.
 
Source: BIS   Read full article  
 
3. It’s been a while since we saw year-over-year declines in exports.
 
Source: Arcano Economics  
 
4. Corporate bond spreads have been widening.
 
Source: @KevinKingsbury, @TheTerminal, Bloomberg Finance L.P.  
 
5. Stock valuations are rising from low levels, although still below the broader EM basket.
 
Source: TS Lombard  
 
6. US retail investors got burned betting against Chinese shares.
 
Source: Vanda Research  


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Emerging Markets

1. Let’s begin with Mexico.
 
Formal job creation (well below last year’s level):
 

 
Investment:
 

 
Vehicle exports:
 

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2. Peru’s president lost his job.
 
Source: @axios   Read full article  
 
The Peruvian sol declined.
 

 
The central bank hiked rates again.
 

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3. Chile’s CPI topped expectations.
 

 
The trade balance was in surplus.
 

 
Copper exports increased (in dollar terms).
 

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4. EM inflation has surprised to the downside.
 
Source: TS Lombard  


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Commodities

1. Mining stocks have about three times the market volatility of spot gold due to their operating leverage, according to PGM Global.
 
Source: PGM Global  
 
2. The LME Nickel price continues to show bullish momentum as inventories trend lower.
 
Source: Aazan Habib, Paradigm Capital  
 
3. Central banks bought a lot of gold in recent months.
 
Source: @ANZ_Research  


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Energy

1. US oil inventories hit a multi-year low last week.
 
Barrels:
 

 
Days of supply:
 

 
The recent decline in inventories has been massive.
 
Source: PGM Global  
 
We are at a 36-year low if the Strategic Petroleum Reserve is included.
 
Source: @JavierBlas  
 
But US refined product inventories jumped, offsetting the decline in crude stocks.
 
Gasoline days of supply and barrels:
 

 

 
Distillates:
 

 

 
Gasoline demand remains soft, which could be signaling an economic slowdown.
 

 
Refined product prices declined sharply, …
 
Gasoline:
 

 
Diesel:
 

 
… dragging oil prices lower. Brent is now nearly flat vs. 12 months ago.
 
Source: Reuters   Read full article  
 

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2. Lower crack spreads have also been contributing to falling gasoline prices.
 
Source: PGM Global  
 
US retail gasoline prices are flat on a year-over-year basis.
 

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3. European natural gas prices continue to rebound.
 

 
4. US-Europe tanker rates have been surging.
 
 
Source: @EIAgov  
 
5. WTI and Brent futures’ open interest has been trending lower.
 
Source: @Ole_S_Hansen, h/t @dailychartbook  


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Equities

1. Are stocks and bonds decoupling as recession fears rise?
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. The cyclicals/defensives ratio is increasingly pricing a recession.
 

 
3. This chart shows Goldman’s soft- and hard-landing scenarios.
 
Source: Goldman Sachs; @LanceRoberts  
 
4. Equity risk premium is too low, according to Nordea’s macro model.
 
Source: @MikaelSarwe  
 
5. The S&P 500 has been correlated with the euro.
 
Source: PGM Global  
 
6. Retail flows continue to slow.
 
Source: Vanda Research  
 
This chart shows retail flows into mega-cap shares.
 
Source: Vanda Research  
 
Retail investors are no longer chasing the market higher with call option purchases.
 
Source: Vanda Research  
 
The drawdown in meme stocks is approaching 90%.
 

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7. Next, we have some sector performance trends over the past five business days.
 
Consumer Discretionary:
 

 
Tech:
 

 
Communication Services:
 

 
Semiconductos:
 

 
Industrials:
 

 
Transportation:
 

 
Energy:
 

 
Housing:
 

 
Healthcare:
 

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8. Finally, here are some equity factor trends.
 
High-dividend and dividend growers:
 

 
Low-vol and high-beta:
 

 
Momentum:
 

 
Growth vs. value:
 


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Alternatives

1. This chart shows VC tech funds’ growth.
 
Source: @FactSet   Read full article  
 
2. Blackstone shares have underperformed massively in recent weeks. Is it just about BREIT (REIT) and BCRED (BDC) funds being gated as redemptions pick up? Or is the market increasingly concerned about alternative assets’ performance as recession approaches?
 


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Credit

Today, let’s take a look at the leveraged loan market.
Canary in the coal mine?
 
Source: @Sebaboyd, @markets   Read full article  
 
Defaults remain low.
 
Source: @lcdnews, @Kakourisr, @PitchBook   Read full article  
 
But distressed balances keep rising.
 
Source: @lcdnews, @Kakourisr, @PitchBook   Read full article  
 
Prices are not rebounding.
 

 
The gap between BB and B-rated loan prices has been widening.
 
Source: Deutsche Bank Research  
 
Loan repayments continue to trend lower.
 
Source: Deutsche Bank Research  


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Rates

1. Long-dated Treasuries are having a good month.
 
Source: @bespokeinvest  
 
Here is some historical data on long-dated Treasuries.
 
Source: @WSJ   Read full article  

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2. Soft (surveys) economic data surprises had a bigger impact on Treasuries than hard data.
 
Source: Morgan Stanley Research  


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Global Developments

1. The dollar’s risk premium has sharply declined from peak levels.
 
Source: Deutsche Bank Research  
 
Positive yield differentials have supported the dollar’s rally.
 
Source: Deutsche Bank Research  

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2. This chart shows the US dollar’s share of FX reserves.
 
Source: BIS   Read full article  
 
How is the US dollar used globally?
 
Source: BIS   Read full article  

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3. Foreign exchange trading volumes continue to climb.
 
Source: BIS   Read full article  
 
4. Here is a list of funds that have lost the most value over the past decade, according to Morningstar.
 
Source: Morningstar   Read full article  


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Food for Thought

1. Population, GDP per capita, energy intensity, and CO2 emissions:
 
Source: Datawrapper  
 
2. K-12 school shootings:
 
Source: @K12ssdb  
 
3. Political tensions around the world:
 
Source: Pew Research Center   Read full article  
 
4. Elon Musk’s tweets:
 
Source: @axios   Read full article  
 
5. Homeownership among Americans aged 25-34:
 
Source: US Census Bureau   Read full article  
 
6. Most commonly used symbols in flags:
 
Source: @OpenAxisHQ  

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