Posted on by The Daily Shot Editor: Lev Borodovsky

Tax refunds are running well below last year’s levels

The Daily Shot: 03-Apr-23
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. The February core PCE inflation came in slightly below forecasts (charts show month-over-month changes). The third panel shows the “supercore” index, which is closely tracked by the Fed.
 

 
Supercore inflation remains elevated on a year-over-year basis (2nd panel).
 

 
Here are the drivers of the supercore index.
 
Source: BCA Research  
 
2. The terminal rate is grinding toward 5% again, with a May rate hike back on the table.
 

 
3. Real consumer spending declined slightly in February.
 

 
• US real disposable personal income edged higher.
 

 
This chart shows US personal income excluding government payments.
 

 
• Here is personal saving as a share of disposable income.
 

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4. The most recent U. Michigan Consumer Sentiment Index showed a decrease compared to the report from early March.
 

 
This chart shows households’ perception of their current financial situation relative to five years ago.
 

 
• Inflation expectations have been easing. But this trend could reverse if oil prices rise sharply (see the Energy section).
 

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5. The MNI Chicago PMI edged higher in March but still points to softer national manufacturing activity (ISM) last month.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Regional Fed indicators also signal ISM weakness ahead.
 
Source: Yardeni Research  

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6. Tax refunds are running well below last year’s levels.
 
Source: Oxford Economics  
 
7. Household net wealth remains elevated, due to historically low debt levels, high cash, and relatively strong asset prices. (2 charts)
 
Source: Mizuho Securities USA  
 
Source: Mizuho Securities USA  

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Canada

1. The GDP bounced in January.
 

 
The economy is tracking 2.8% growth in Q1.
 
Source: @rtkwrites, @economics   Read full article  
 
Source: @rtkwrites, @economics   Read full article  

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2. Speculative accounts continue to bet against the loonie.
 

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The United Kingdom

1. Home prices declined further on a year-over-year basis in March.
 

 
Source: Reuters   Read full article  

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2. The Lloyds business sentiment index improved last month.
 

 
3. UK financials outperformed US peers, boosting the pound.
 
Source: Capital Economics  
 
4. The UK is currently experiencing some of the most contentious labor disputes since 1989.
 
Source: @WillWilkesNews, @tomelleryrees, @eckldorna, @bpolitics   Read full article  
 
5. Immigration kept the workforce from shrinking last year.
 
Source: Pantheon Macroeconomics  

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The Eurozone

1. Headline inflation indicators eased in March.
 
• Italy:
 

 
• France (still running hot):
 

 
• The Netherlands:
 

 
• The Eurozone:
 

 
However, core inflation continues to surge.
 

 
Source: Reuters   Read full article  

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2. German import prices are headed toward deflation (due to lower energy prices).
 

 
3. French household consumption of goods remains on a downward trajectory.
 

 
4. Germany’s unemployment rate increased in March.
 

 
Unemployment held steady at the Eurozone level.
 

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Japan

1. The Tankan report showed soft manufacturing sentiment in Q1.
 

 
Source: Reuters   Read full article  
 
• The non-manufacturing index is back at pre-COVID levels.
 

 
• Manufacturing output prices signal a peak in Japan’s consumer inflation.
 
Source: Capital Economics  

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2. Non-bank financial institutions own a lot of foreign assets.
 
Source: Gavekal Research  

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Asia – Pacific

1. South Korea’s exports remain well below last year’s levels.
 

 
Imports are also down on a year-over-year basis.
 
Source: ING  
 
South Korea’s manufacturing activity contracted at a faster pace in March.
 
Source: S&P Global PMI  

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2. Australia’s residential building approvals are at multi-year lows.
 

 
Home prices jumped last month.
 

 
Source: @WSJ   Read full article  

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China

1. The manufacturing PMI report from S&P Global was softer than expected, suggesting that the rebound has stalled.
 

 
Source: Reuters   Read full article  

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2. Onshore stocks continue to hold support relative to global equities.
 
Source: BCA Research  
 
A sustained economic recovery could support equity market outperformance.
 
Source: BCA Research  

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3. Banks’ interest margins have been shrinking in recent years.
 
Source: Marco Polo   Read full article  

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Emerging Markets

1. Let’s run through Asian manufacturing PMI indices.
 
• ASEAN (slower growth):
 
Source: S&P Global PMI  
 
• Thailand (growth continues):
 
Source: S&P Global PMI  
 
• Indonesia (faster expansion):
 
Source: S&P Global PMI  
 
• Malaysia (contraction):
 
Source: S&P Global PMI  
 
• The Philippines (robust):
 
Source: S&P Global PMI  
 
• Vietnam (back in contraction):
 
Source: S&P Global PMI  
 
• India (very strong):
 
Source: S&P Global PMI  

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2. India’s key industries’ output remains robust.
 

 
Source: Economic Times   Read full article  

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3. Pakistan’s inflation continues to surge (after currency devaluation).
 

 
4. South Africa’s trade balance unexpectedly swung into surplus.
 

 
5. Mexico’s unemployment rate hit a multi-year low.
 

 
6. Next, we have some performance data for March.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity ETFs:
 

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Cryptocurrency

1. Crypto liquidity deteriorated in March.
 
Source: @isabelletanlee, @technology   Read full article  
 
2. Here is last month’s performance for select cryptos.
 

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Commodities

This chart displays the March performance of major commodity markets.
 

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Energy

1. OPEC unexpectedly announced a large cut in production, …
 
Source: Reuters   Read full article  
 
… sending crude prices sharply higher.
 

 
Positioning has been bearish, which could support further gains.
 
Source: Deutsche Bank Research  

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2. This chart shows US natural gas pipeline exports to Mexico.
 
Source: @EIAgov  
 
3. Weak natural gas prices have been pressuring coal.
 
Source: @WSJ   Read full article  

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Equities

1. Let’s start with the quarterly attribution for the S&P 500 and the S&P 600.
 

 

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2. Top three stocks have been driving recent gains in the S&P 500.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
3. Tech shares are trading at a substantial premium to the S&P 500.
 

 
4. Hedge funds have rotated from cyclicals to defensives.
 
Source: JP Morgan Research; @luwangnyc, @markets   Read full article  
 
5. Fund flows show rotation from value to secular growth (from financials to tech).
 
Source: Deutsche Bank Research  
 
6. So far, S&P 500 sector returns have been underwhelming compared to prior bear market lows.
 
Source: @scottcharts  
 
7. Deutsche Bank’s “early cycle” basket has sharply underperformed “end of cycle” stocks.
 
Source: Deutsche Bank Research  
 
8. Options activity is down sharply from the recent peak.
 
Source: Deutsche Bank Research  
 
• The Nasdaq 100 VIX-equivalent index hit its lowest level since January 2022.
 

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9. Finally, we have some performance data for March.
 
• Sectors:
 

 
• Equity factors:
 

 
• Macro basket pairs:
 

 
– Stocks that benefit from higher prices underperformed.
 

 
• Thematic ETFs:
 

 
• Largest US tech firms:
 

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Credit

1. Small banks saw a tiny portion of lost deposits return last week.
 

 
Total US bank deposits continue to fall.
 

 
What’s driving the declines? Deposits have been flowing into the Fed’s RRP facility …
 

 
… via retail money market funds. We should see some deposits return to the banking system, now that we are past the quarter-end.
 

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2. Weaker banks continue to pay a premium to borrow in the fed funds market.
 

 
3. Bank credit default swap spreads remain low relative to previous spikes.
 
Source: MRB Partners  
 
4. CMBS spreads continue to widen.
 

 
5. Next, we have some performance data for March.
 

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Rates

Here are the Treasury yield change attributions.
 
• March:
 

 
• Q1:
 

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Global Developments

1. So far, this has been the year of reversals.
 
Source: @LizYoungStrat  
 
2. Next, we have some DM performance data for March.
 
• Currency indices:
 

 
• Yields:
 

 
• Large-cap equity indices:
 

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Food for Thought

1. Global app revenues:
 
Source: Statista  
 
2. Changes in poverty rates:
 
Source: US Census Bureau   
 
3. Deadliest natural disasters:
 
Source: @genuine_impact  
 
4. Iran’s stockpile of enriched uranium:
 
Source: @ethanbronner, @bpolitics   Read full article  
 
5. GOP 2024 nomination poll:
 
Source: @MorningConsult   Read full article  
 
6. Better to be born rich than gifted:
 
Source: Papageorge and Thom   Read full article  
 

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