Homebuilders see a pullback in demand

The Daily Shot: 19-Sep-23
The United States
Canada
The United Kingdom
The Eurozone
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Alternatives
Rates
Global Developments
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
Homebuilder sentiment unexpectedly dipped this month,
 

 
Source: Reuters   Read full article  
 
… as elevated mortgage rates and reduced housing affordability take a toll on demand (2 charts).
 

 
Source: Torsten Slok,¬†Apollo  
 
Buyer traffic and demand expectations declined sharply.
 

 
An increasing number of homebuyers are backing out of ‘pending sales.’
 
Source: Redfin  
 
The University of Michigan’s gauge of consumer sentiment regarding housing purchase conditions remains depressed.
 

 
Home prices continue to outpace rents.
 
Source: Apartment List  
 
Asking prices on listed homes are well above last year’s levels.
 
Source: Redfin  
 
Inventories remain low.
 
Source: Redfin  
 
Demand for vacation homes has been soft.
 
Source: Redfin  

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2. Next, we have some updates on inflation.
 
Nomura sees a drop in core PCE inflation in August (based on the CPI and PPI reports). The supercore PCE is also expected to show a decline (month-over-month). Will the FOMC adjust the dot plot lower?
 
Source: Nomura Securities  
 
Forecasts for the US inflation trajectory have been consistently too low.
 
Source: Deutsche Bank Research  
 
The University of Michigan’s long-term consumer inflation expectations highlight a notable discrepancy between the median (the predominant measure) and the mean. This suggests a skewness towards higher inflation expectations, indicating that some consumers anticipate a massive inflation spike.
 
Source: @TheTerminal, Bloomberg Finance L.P. h/t Chris Low, FHN Financial  

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3. Increased talk of a “soft landing” tends to precede a recession.
 
Source: @AnnaEconomist, @economics   Read full article  
 
4. US liquidity conditions are very tight.
 
Source: Longview Economics  


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Canada

1. Consumer confidence continues to soften.
 

 
2. Housing starts are holding up.
 

 
3. Industrial producer prices jumped last month.
 


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The United Kingdom

1. Labor market slack is building.
 
Source: Morgan Stanley Research  
 
2. Before the late 1960s, substantial deficits only occurred during wars. Since then, according to Deutsche Bank, peacetime (and recession-related) deficits have been normalized as a policy tool.
 
Source: Deutsche Bank Research  
 
3. What are the most important election issues?
 
Source: @RedfieldWilton  


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The Eurozone

1. The Bund curve has been shifting higher across the board.
 

 
2. The ECB’s real policy rate remains negative.
 
Source: Deutsche Bank Research  
 
3. Germany’s industries, which are sensitive to energy prices, continue to struggle.
 
Source: @financialtimes   Read full article  
 
4. French nuclear power generation recovers, with the rivers used for reactor cooling returning to a more typical temperature.
 
Source: Macrobond  
 
5. Ireland’s commercial real estate activity is crashing.
 


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China

1. Foreigners and Hong Kong-based investors continue to exit mainland stocks.
 

 
2. China’s stocks continue to trade at a substantial discount to India and US peers.
 
Source: @financialtimes   Read full article  
 
3. Here is a look at China’s exports by destination (year-over-year changes).
 
Source: Pantheon Macroeconomics  
 
4. Fitch downgraded the US dollar debt of Longfor, an investment-grade developer..
 
Source: Fitch Ratings   Read full article  
 
After last year’s rebound, bond prices are rolling over.
 

 
The stock is trending lower as well.
 

 
Here is the overall index of property firms.
 

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5. The AUD/MXN exchange rate is a proxy for relative optimism on China vs. the US.
 


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Emerging Markets

1. Brazil’s Ibovespa index has been stuck in a two-year-long range. Could we see a breakout?
 

 
Most investors expect Ibovespa to trade between 130K and 140K next year, according to a BofA survey of fund managers.
 
Source: BofA Global Research  
 
Here are their expectations for policy rates and the real. (2 charts)
 
Source: BofA Global Research  
 
Source: BofA Global Research  

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2. According to Russia’s government, the unemployment rate hit the lowest level in years.
 

 
3. Which countries have the highest interest payments as a percentage of government revenues?
 
Source: @financialtimes   Read full article  


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Cryptocurrency

1. Bitcoin Cash (BCH) is off to a strong month, while Ether (ETH) is lagging top peers.
 
Source: FinViz  
 
2. XRP’s liquidity has improved significantly after the July court ruling in the Ripple/SEC case.
 
Source: @KaikoData  
 
3. Crypto funds saw another week of outflows.
 
Source: CoinShares   Read full article  
 
Long-bitcoin funds accounted for most outflows last week, although investors started to exit short-bitcoin products.
 
Source: CoinShares   Read full article  


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Commodities

1. US corn futures remain under pressure.
 

 
Source: Reuters   Read full article  

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2. Sugar futures hit a multi-year high amid export restrictions in Asia and concerns about the sugar cane harvest in Brazil.
 

 
3. Orange juice prices hit another record high.
 
  Further reading  
 
4. The rally in oats is fading quickly.
 


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Energy

1. Brent oil performs best when other commodity markets are in an uptrend.
 
Source: Mensur Pocini, Julius Baer  
 
Technicals suggest that crude oil is overbought.
 

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2. Oil has diverged from inflation expectations.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Here is a forecast for oil market balance and prices from Capital Economics.
 
Source: Capital Economics  
 
4. The recent crude rally has been driven mostly by higher demand.
 
Source: @ZiadMDaoud   Read full article  
 
5. European natural gas prices are moving lower as Chevron’s Australia LNG exports hold up.
 

 
Source: Reuters   Read full article  

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6. The US is becoming the world’s largest LNG supplier.
 
Source: @kevinorland, @markets   Read full article  


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Equities

1. The market expects the S&P 500 Q3 earnings to be flat quarter-over-quarter. Deutsche Bank sees an increase.
 
Source: Deutsche Bank Research  
 
Will core earnings hit another record high?
 
Source: Deutsche Bank Research  
 
Analysts are consistently raising their earnings forecasts for the S&P 500 over the upcoming 12 months.
 

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2. Recent IPOs have sharply underperformed the broader market.
 
Source: Goldman Sachs; @dailychartbook  
 
Post-IPO shares lost further ground over the past few days.
 

 
IPO activity has been soft. Will the Instacart and Arm IPOs give the market a boost?
 
Source: S&P Global Market Intelligence  
 
Source: Markets Insider   Read full article  

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3. Will stronger earnings increase share buybacks?
 
Source: Deutsche Bank Research  
 
4. Equity fund flows have been robust lately.
 
Source: BCA Research  
 
Is the market pricing gains in business activity?
 
Source: Deutsche Bank Research  

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5. US equity valuations remain very high relative to real rates.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
6. Year-to-date, the Russell 2000 (small caps) is down almost 12% vs. the S&P500.
 

 
The Russell 2000/S&P 500 ratio hit the lowest level since 2002.
 


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Alternatives

1. Most advisors surveyed by Blackstone raised their allocation to alternatives last year, particularly in private real estate. (2 charts)
 
Source: Blackstone   Read full article  
 
Source: Blackstone   Read full article  

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2. It was a soft August for PE/VC investments relative to recent years.
 
Source: S&P Global Market Intelligence  
 
3. Here is a look at startups’ median valuation cap and amount raised by industry during the first half of the year.
 
Source: Carta  
 
This table ranks the top metro areas by startup invested capital, organized by industry.
 
Source: Carta  
 
Startup hiring has plummeted over the past year.
 
Source: Carta  

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4. US private equity middle-market buyouts are gaining significant traction this year.
 
Source: PitchBook  
 
5. GP deal activity, which involves acquiring stakes in asset managers, is gaining momentum.
 
Source: @theleadleft  
 
6. Over the last year, perpetual assets under management among US-listed private equity firms have grown by 13.2%, outpacing total AUM growth of 9.8%, according to PitchBook.
 
Source: PitchBook  


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Rates

1. The market continues to reduce its expectations for the pace of Fed rate cuts.
 

 

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2. Historically, the timing of the last rate hike coincided with a cycle peak in the 10-year Treasury yield.
 
Source: Deutsche Bank Research  
 
3. Having locked in very low long-term rates, some companies are taking advantage of the inverted yield curve.
 
Source: @WSJ   Read full article  
 
4. Treasury fund inflows are expected to hit a record high this year.
 
Source: BCA Research  
 
5. The Fed’s securities portfolio market-to-market losses continue to grow. Of course, in practice, this doesn’t matter because, unlike commercial banks, the Fed has no funding issues.
 

 
Source: Reuters   Read full article  


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Global Developments

1. Speculative accounts have covered their bets against the dollar.
 

 
2. This chart shows the share of renters spending more than 40% of disposable income on rent.
 
Source: The Economist   Read full article  


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Food for Thought

1. Reliance on key minerals in vehicle production:
 
Source: Gavekal Research  
 
2. Mac sales:
 
Source: @chartrdaily  
 
3. Computer and software spending (inflation-adjusted):
 
Source: Wells Fargo Securities  
 
4. Americans with limited English proficiency:
 
Source: @jeremybney  
 
5. COVID variants:
 
Source: @financialtimes   Read full article  
 
6. Eating rice in the US:
 
Source: @CivicScience   Read full article  
 

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