The Daily Shot: 18-Apr-23
• The United States
• Canada
• The Eurozone
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. The NY Fed’s Empire Manufacturing Index, the first regional factory report of the month, was remarkably strong.
• The index of new orders soared.
• The Empire index points to a rebound in factory activity at the national level.
• However, it is important to exercise caution in interpreting this positive surprise. The current upswing in performance may prove to be transitory, given that the outlook for new orders remains subdued.
• Cost pressures in the region have been moderating.
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2. Homebuilder sentiment inched higher this month, …
… as sales expectations improve.
• Prospective buyer traffic showed no improvement.
• Softer mortgage applications point to downside risks for builder sentiment.
Source: Pantheon Macroeconomics
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3. Rents are down on a year-over-year basis for the first time since the COVID shock, according to Redfin.
Source: Redfin
According to CoreLogic, single-family housing rent inflation is slowing rapidly, led by higher-price detached properties,
Source: CoreLogic
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4. More workers without a college degree expect to be switching jobs or retiring.
Source: Federal Reserve Bank of New York
5. Scotiabank Economics expects vehicle sales to keep climbing over the next few quarters.
Source: Scotiabank Economics
6. The terminal rate continues to rise, …
… as the market assigns a small probability to a June rate hike.
• Treasury yields have been climbing.
• When will the Fed start an easing cycle?
– WSJ survey:
Source: @WSJ Read full article
– BofA survey of fund managers:
Source: BofA Global Research
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Canada
1. Consumer confidence continues to recover.
2. Manufacturing sales declined more than expected in February.
Source: Reuters Read full article
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The Eurozone
Economists are boosting their forecasts for the currency bloc’s economic growth.
Here is the ECB’s survey of professional forecasters.
Source: ECB
• Economists have raised their inflation forecasts for 2023 and 2024 (vs. the Q4 forecast).
Source: ECB
• Projections for interest rates and the euro are up.
Source: ECB
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Asia – Pacific
1. Japan’s unions negotiated the largest wage hike in 30 years.
Source: Wells Fargo Securities
However, real cash earnings remain very weak.
Source: Wells Fargo Securities
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2. Investors see a sharp divergence between Asian and global economic growth.
Source: BofA Global Research
3. New Zealand’s home sales remain depressed for this time of the year.
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China
1. China’s Q1 GDP growth was slightly higher than expected, …
… boosted by a surge in consumption.
Source: ABC News Read full article
• Industrial production also improved.
• Residential property investment remains depressed.
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2. China’s steel output has been surging, …
Source: @markets Read full article
… but Beijing wants to cap the nation’s steel production.
Source: Caixin Read full article
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3. Consumer confidence has been rebounding this year.
Source: @axios Read full article
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Emerging Markets
1. Brazil’s service sector output was down more than expected in January.
2. Shares of India’s Adani have stabilized.
3. Investors are becoming more concerned about South Africa’s electricity grid.
Source: BofA Global Research
4. This chart shows expected annualized returns across select EM equity indices over the next decade. Brazil is forecasted to lead, while India’s high starting valuation is relatively unfavorable.
Source: Research Affiliates
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Cryptocurrency
1. Crypto funds have seen an improvement in inflows in recent weeks.
Source: CoinShares Read full article
Long-bitcoin funds accounted for most inflows last week. However, investors also added to short-bitcoin funds and continued to exit multi-asset products.
Source: CoinShares Read full article
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2. The SEC could include decentralized finance (DeFi) in its widening definition of regulated exchanges.
Source: CoinDesk Read full article
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Commodities
1. Speculative net-long gold positioning has trended lower over the past year.
Source: Global X ETFs Read full article
• Gold prices have risen despite recent ETF outflows.
Source: Global X ETFs Read full article
• Global fund managers now see gold as overvalued.
Source: BofA Global Research
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2. CME live cattle futures hit a record high due to a tighter cash market.
Feeder cattle futures are also surging.
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Energy
1. CTAs remain bearish on crude oil.
Source: Deutsche Bank Research
2. Over the past decade, rising oil prices have not supported a rebuild in foreign exchange reserves of major oil exporters.
Source: PGM Global
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Equities
1. The buy-the-dip crowd has largely retained their purchases of regional bank ETFs.
2. Fund managers are underweight financials, …
Source: BofA Global Research
… particularly relative to bonds.
Source: BofA Global Research
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3. Fund flows suggest that the S&P 500 should be lower.
Source: Goldman Sachs; @VildanaHajric, @markets Read full article
Source: @JessicaMenton, @lena_popina, @markets Read full article
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4. During recent recessions, the earnings drawdown of US growth stocks has been less severe than value stocks.
Source: MarketDesk Research
5. S&P 500 futures liquidity has improved over the past couple of weeks
Source: Deutsche Bank Research
6. Higher highs and higher lows?
Source: Chris Murphy, Susquehanna International Group
7. US small-cap earnings are significantly above their pre-pandemic trend.
Source: MarketDesk Research
Is small-cap underperformance over?
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8. The VIX curve is in contango.
Source: Chris Murphy, Susquehanna International Group
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Credit
1. Fund managers see commercial real estate as the most likely source for a systemic credit event.
Source: BofA Global Research
• Here is how the expected drawdowns in commercial property prices compare to the GFC?
Source: Morgan Stanley Research; III Capital Management
• Office REITs continue to struggle.
• US office properties’ cap rate has been surging.
LPL Research: … capitalization (cap) rates, which are used to estimate the return on investment for properties, have climbed to over 9% for the office space segment, marking nearly a 3.0% increase since 2021
• The percentage of workers returning to the office has stalled.
Source: LPL Research
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2. This chart shows the sources of credit for small businesses.
Source: Goldman Sachs
3. High-yield spreads are elevated relative to VIX.
Source: @TheTerminal, Bloomberg Finance L.P.
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Global Developments
1. IPO activity slowed sharply in Q1.
Source: S&P Global Market Intelligence
2. Developed ex-US equities are expected to deliver annualized returns of 10% over the next decade, led by Sweden, Australia, and Japan.
Source: Research Affiliates
3. The next chart shows productivity growth since 2010.
Source: Codera Analytics
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Food for Thought
1. US solar panel imports:
Source: S&P Global Market Intelligence
2. Shrinking salt lakes:
Source: The New York Times Read full article
3. Gun deaths among US children and teens:
Source: Pew Research Center Read full article
Source: Pew Research Center Read full article
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4. M.D. residency programs by specialty:
Source: @axios Read full article
5. Talking about mental health:
Source: @CivicScience Read full article
6. The Democracy Index across Asia:
Source: The Economist Read full article
7. US vs. China R&D spending:
Source: @business Read full article
8. Law & Order’s ratings over time:
Source: @chartrdaily
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