The Daily Shot: 13-Dec-22
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought
The United States
1. Credit growth has been robust. But banks appear to be curbing lending amid recession concerns.
Source: Oxford Economics
2. When will this recession start? The next chart is from a survey by Deutsche Bank.
Source: Deutsche Bank Research
• Nationwide’s economic projections show a GDP decline in 2023 (for the full year), which is well below the FOMC’s projections from September. The FOMC is likely to downgrade its forecast this week.
Source: Nationwide
• With the recession looming, the market expects deeper rate cuts after reaching the terminal rate.
Source: BlackRock Investment Institute
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3. Business investment is expected to slow rapidly.
Source: Variant Perception
4. The budget deficit is now following last year’s trajectory.
Interest payments continue to climb.
Source: Oxford Economics
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5. Real household net worth (blue line) is back on the pre-COVID trend.
6. Declining population growth limits US economic potential.
Source: Goldman Sachs
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Canada
1. The BoC is more likely to surprise the markets than the Fed.
Source: Desjardins
2. USD/CAD overnight implied vol surged ahead of the US CPI and FOMC.
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The United Kingdom
1. The economy grew in October, …
… driven by services.
Source: ONS Read full article
• Manufacturing production improved, but it was offset by mining, resulting in flat industrial production.
• Services output also increased.
• Construction output continues to show strength.
• The trade deficit narrowed.
2. Economists continue to forecasts an ugly 2023 for the UK. Welcome to stagflation.
3. Last month’s growth in payrolls topped expectations. More on this tomorrow.
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The Eurozone
1. Where is the terminal rate? Below is a forecast from Pantheon Macroeconomics compared to the consensus estimate.
Source: Pantheon Macroeconomics
And this chart shows Deutsche Bank’s survey results.
Source: Deutsche Bank Research
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2. Price and demand expectations have diverged (stagflationary signal).
Source: Oxford Economics
3. Financial conditions remain depressed.
Source: Deutsche Bank Research
4. EUR/USD overnight implied vol jumped ahead of US CPI, the FOMC, and the ECB.
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Japan
1. Machine tool orders are rolling over.
2. The BoJ has consistently upgraded its inflation and growth forecasts since April.
Source: BCA Research
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Asia – Pacific
1. New Zealand’s housing sales are down 36% versus 12 months ago, …
… as home prices tumble.
Source: @ANZ_Research
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2. Next, we have some updates on Australia.
• Consumer confidence (bottomed?):
• Households’ spending intentions:
• Business confidence (worsening):
• Exports (downside risk):
Source: Alpine Macro
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China
1. Loan growth was weaker than expected, …
… as households remain cautious (2 charts).
Source: Pantheon Macroeconomics
Source: TS Lombard
• Total credit growth was also below forecasts.
Source: TS Lombard
• The broad money supply growth accelerated.
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2. USD-denominated high-yield bonds are rebounding as Beijing promises more support.
3. Hong Kong stocks rose further as the city lifted COVID-19 curbs on arrivals.
Source: South China Morning Post Read full article
The Hang Seng Index returned above support, albeit still below its long-term uptrend.
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Emerging Markets
1. India’s inflation surprised to the downside.
Industrial production weakened in October.
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2. Philippine exports hit a record high.
3. Mexico’s manufacturing output has been holding up.
4. EM reserves declined in recent months.
Source: IIF
5. Which economies are most vulnerable to US dollar strength?
Source: Oxford Economics
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Cryptocurrency
1. FTX’s founder was arrested Sunday night in the Bahamas.
Source: @WSJ Read full article
2. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) is approaching its 200-day moving average. A break above resistance could signal risk-off conditions.
3. Bitcoin, ether, and tether still dominate the total crypto market cap.
Source: Oxford Economics
4. The crypto Fear & Greed Index has shifted between “extreme fear” and “fear” over the past few months.
Source: Alternative.me
5. Several altcoins have lost momentum relative to bitcoin, with widespread technical breakdowns. The chart below plots weekly relative strength and momentum across altcoins versus bitcoin.
Source: @StocktonKatie
6. The FTX-induced crash in SOL (Solana’s token) has been remarkable – with no signs of recovery. There are now concerns about the Solana network stability.
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Energy
Oil ETFs are seeing inflows (3 charts).
Source: @alexlongley1, @markets Read full article
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Equities
1. The bottom-up S&P 500 price target for the end of 2013 is about 13% above current levels.
Here is the track record of these forecasts.
Source: @FactSet Read full article
And this chart shows bottom-up price targets by sector.
Source: @FactSet Read full article
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2. Market sentiment remains cautious.
• Single-stock call volume:
Source: Deutsche Bank Research
• Premiums paid for puts vs. calls:
Source: @sentimentrader
• The put/call ratio 50-day moving average (highest since the GFC):
• Goldman’s sentiment indicator:
Source: Goldman Sachs; @WallStJesus
However, BofA’s fund manager survey shows cash levels peaking …
Source: BofA Global Research
… and risk appetite starting to recover.
Source: BofA Global Research
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3. Are growth stocks oversold?
Source: BCA Research
4. There isn’t much interest in shorting SPY.
Source: JP Morgan Research; @themarketear
5. Here is the S&P 500 performance in Fed tightening cycles.
Source: Tier1 Alpha
6. This chart shows non-financial equity issuance trends since 1998.
Source: Yardeni Research
7. Equity market volatility has been more extreme over the past three years.
Source: BCA Research
8. VIX fell into a death cross.
Source: @JessicaMenton, @markets Read full article
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Credit
1. US bank-held business loans are back on the pre-COVID trend.
Source: Arcano Economics
But banks are tightening lending standards.
Source: Longview Economics
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2. What are the drivers of recent rating downgrades?
Source: S&P Global Ratings
3. When do spreads peak in a recession?
Source: Capital Economics
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Rates
1. The 10-year/3-month Treasury yield curve tends to trough between zero and -100 basis points in the lead-up to recessions.
Source: BCA Research
2. Fund managers are now overweight bonds.
Source: BofA Global Research
Source: BofA Global Research
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3. The iShares TIPS Bond ETF (TIP) is starting to underperform the iShares 7-10 year Treasury Bond ETF (IEF). A breakdown in the TIP/IEF price ratio could point to a falling inflation environment.
Source: Aazan Habib, Paradigm Capital
4. SOFR has climbed above the Fed’s RRP rate.
Source: Morgan Stanley Research
5. LIBOR bond issuance stopped at the end of 2021. Overnight risk-free or nearly risk-free rates (RFRs such as SOFR) have replaced LIBOR.
Source: BIS Read full article
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Global Developments
1. Below are some projections for central bank balance sheets from OECD.
Source: OECD Read full article
2. This has been the most coordinated global hiking cycle in history. Will we see rate cuts soon?
Source: Deutsche Bank Research
3. The decline in bond yields has occurred amid narrower credit spreads.
Source: MRB Partners
4. Real wages are down this year as inflation takes a toll.
Source: ILO Read full article
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Food for Thought
1. US household size over time:
Source: Calculated Risk
2. The cost of student loan payment pause:
Source: Committee for a Responsible Federal Budget
3. Applying for student loan forgiveness:
Source: Morning Consult Read full article
4. Major military exercises:
Source: Reuters Read full article
5. US daily COVID hospitalizations by age:
Source: The New York Times Read full article
6. Climate-related litigation:
Source: Barclays Research
7. Blog posts on Twitter? No thanks …
Source: @chartrdaily
8. Internal containment fusion reaction:
Source: @financialtimes Read full article
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