The debt ceiling countdown has started

The Daily Shot: 20-Jan-23
The United States
Canada
The United Kingdom
The Eurozone
Europe
Japan
China
Emerging Markets
Commodities
Energy
Equities
Credit
Food for Thought



 

The United States

1. Unemployment claims continue to signal tightness in the labor market. Initial applications for jobless benefits hit a multi-year low for this time of the year.
 

 
Below is the spread between the 2023 claims and the average of 2018, 2019, and 2022 (these three years had exceptionally low unemployment applications).
 

 
And here are the continuing jobless claims. The layoffs we keep hearing about have yet to appear in these figures.
 

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2. Next, we have some updates on the housing market.
 
Homebuilder sentiment showed some improvement this month.
 

 
Housing starts registered their first annual decline since 2009.
 
Source: @gutavsaraiva, @markets   Read full article  
 
Single-family housing starts increased last month as builders cleared their backlog of projects.
 

 
But single-family construction permits tumbled further, …
 

 
… down 39% versus December of 2021. This was the largest year-over-year decline since 2009.
 

 
Multi-family housing under construction hit a new record.
 

 
This chart shows the divergence between multi-family starts and completions.
 
Source: Calculated Risk  
 
Homebuilders have been cutting prices.
 
Source: @RickPalaciosJr  
 
Housing affordability is near multi-decade lows but appears to have bottomed.
 
Source: Goldman Sachs  
 
How much home can you buy with a $1,600 monthly payment and a 20% down payment?
 
Source: @M_McDonough  
 
This chart shows the number of Americans who qualify for a mortgage based on the rate and loan size.
 
Source: @lenkiefer  
 
US homeowner leverage is low relative to many European economies.
 
Source: Oxford Economics  
 
Mortgage credit quality has improved markedly since the housing crisis.
 
Source: Oxford Economics  
 
Consumers now expect home prices to be lower in 12 months.
 

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3. The debt ceiling countdown has started. The “extraordinary measures” (tapping federal employee pension funds) are expected to last through early June.
Source: POLITICO   Read full article  
 
Source: @WSJ   Read full article  
 
As we approach the precipice, economic uncertainty will surge, and consumer sentiment will deteriorate – similar to 2011.
 
Source: Wells Fargo Securities  
 
We will see dislocations in the Treasury bill market, and risk assets will take a hit.
 
Source: Wells Fargo Securities  

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4. Here is a look at announced infrastructure investment across the US.
 
Source: Global X ETFs   Read full article  
 
Most upcoming infrastructure spending will be transport related.
 
Source: Global X ETFs   Read full article  

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5. Consumer spending patterns have not returned to pre-COVID trends.
 
Source: Industrial Alliance Investment Management  


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Canada

Home prices have declined for six months in a row.
 

 
Here is the housing price index drawdown.
 
Source: Industrial Alliance Investment Management  


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The United Kingdom

1. Consumer confidence unexpectedly declined this month.
 
Source: @financialtimes   Read full article  
 

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2. UK small/mid caps have been underperforming.
 
Source: PGM Global  
 
3. Next, we have some data on UK nuclear power.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. The current account is back in surplus.
 

 
2. Here is the evolution of labor input.
 
Source: ECB   Read full article  
 
3. This chart shows economic sentiment indicators spider chart.
 
Source: European Commission   Read full article  
 
Sentiment indicators have been improving recently.
 
Source: Arcano Economics  

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4. How much does the market expert the ECB and the Fed to cut rates over the next two years?
 
Source: Nordea Markets  


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Europe

1. European stocks had a strong start, …
 
Source: Deutsche Bank Research  
 
… as fund flows turned positive.
 
Source: BofA Global Research  

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2. This scatterplot shows sector valuations vs. positioning.
 
Source: BofA Global Research  
 
European REITs look cheap.
 
Source: Oxford Economics  

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3. It’s been a warm winter so far.
 
Source: @JavierBlas, @opinion   Read full article  
 
There will be plenty of natural gas in storage.
 
Source: Arun Toora, BloombergNEF   Read full article  
 
This map shows the reduction in natural gas usage.
 
Source: Statista  

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4. More pain ahead for Sweden’s property prices?
 
Source: @AndreasSteno   Read full article  


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Japan

1. Inflation continues to climb.
 

 
Wages are lagging behind inflation.
 
Source: Fitch Ratings  

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2. BoJ’s JGB purchases have been unprecedented.
 
Source: BofA Global Research  


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China

1. The housing market is primed for a bounce.
 
Source: Gavekal Research  
 
But prices are in “bubble” territory.
 
Source: Oxford Economics  

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2. This chart compares China’s and US money supply growth.
 
Source: Citi Private Bank  
 
3. Here are the key contributions to GDP growth.
 
Source: Nordea Markets  
 
4. Most investors now expect a stronger Chinese economy this year.
 
Source: BofA Global Research  
 
5. Diversifying supply chains away from China has not been easy.
 
Source: @financialtimes   Read full article  
 
6. Hong Kong’s unemployment rate continues to decline.
 


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Emerging Markets

1. Brazil’s unemployment rate keeps falling.
 

 
2. Indonesia’s central bank hiked rates again, …
 

 
… but the cycle is ending soon.
 
Source: ING  

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3. EM fund flows surged last week.
 
Stocks:
 
Source: BofA Global Research  
 
Stocks and bonds:
 
Source: BofA Global Research  

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4. Which countries are most exposed to US dollar strength?
 
Source: Oxford Economics  


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Commodities

1. Copper entered a golden cross.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Industrial metals supplies are very low.
 
Source: @ANZ_Research  
 
3. Gold miners’ shares are trailing gold prices.
 
h/t @themarketear  


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Energy

1. US oil stockpiles continue to rise.
 

 
But refined product inventories remain exceptionally low (2 charts).
 

 
Source: @HFI_Research  
 
US refinery inputs declined sharply in recent weeks.
 

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2. Russian oil is back above the $60/bbl cap.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. US natural gas is nearing $3/mmbtu.
 


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Equities

1. The S&P 500 downtrend resistance is holding.
 

 
The index has not sustained a move above the 200-day moving average for some time.
 
Source: @carlquintanilla, @fundstrat  

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2. Where do fund managers see the S&P 500 finishing the year?
 
Source: BofA Global Research  
 
3. US shares continue to lag global peers, with growth stocks underperforming more than value.
 

 
Source: S&P Dow Jones Indices  
 
How do the S&P 500 and the UK equivalent index differ from global sector weights?
 
Source: S&P Dow Jones Indices  

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4. Here is the early 1970s analog …
 
Source: @McClellanOsc  
 
5. There are many unprofitable companies in the Russell 2000 (small cap) index.
 
Source: Morgan Stanley Research; @MichaelAArouet  
 
6. Finally, we have some sector performance charts over the past five business days.
 
Financials:
 

 
Consumer staples:
 

 
Communication services:
 

 
Transportation:
 

 
Industrials:
 


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Credit

1. Are banks’ interest margins about to peak?
 
Source: Moody’s Investors Service  
 
2. Default probabilities have been rising in some sectors.
 
Source: S&P Global Market Intelligence  
 
3. Global bond sales surged this month.
 
Source: @GarfieldR1966, @josyanajoshua, @markets   Read full article  
 
4. IG bond funds continue to see inflows.
 
Source: BofA Global Research  
 
Leveraged loan fund flows have turned positive.
 
Source: BofA Global Research  

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5. The US leveraged loan default rate remains low, although investors expect trouble ahead. (2 charts)
 
Source: PitchBook   Read full article  
 
Source: PitchBook   Read full article  
 
A relatively small amount of outstanding leveraged loans mature in 2024 or earlier.
 
Source: PitchBook   Read full article  


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Food for Thought

1. Stock market capitalization by country:
 
Source: @acemaxx, @GoldmanSachs  
 
2. EV-related spending on factories:
 
Source: @WSJ   Read full article  
 
3. Separating or blending work and life:
 
Source: Gallup   Read full article  
 
4. Employment in child daycare services:
 
Source: Wells Fargo Securities  
 
5. Who deserves equal coverage?
 
Source: Pew Research Center   Read full article  
 
6. The impact of social media on democracy:
 
Source: Pew Research Center   Read full article  
 
7. The population of India’s states compared with different countries:
 
Source: Visual Capitalist   Read full article  
 
8. Modern cars all look the same.
 
Source: MotorBiscuit.com   Read full article  

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Have a great weekend!


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