The Daily Shot: 20-Aug-24
• The United States
• Europe
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Energy
• Equities
• Alternatives
• Credit
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the labor market.
• We could see a substantial downward revision in payrolls for 2024 (2 charts; see overview).
Source: Commerzbank Research
Source: Goldman Sachs; @MikeZaccardi
• Fewer companies are mentioning labor shortages and labor costs on earnings calls.
Source: Goldman Sachs; @MikeZaccardi
• The NY Fed’s labor market survey highlighted increased concerns about potential job losses among US households, …
Source: @economics Read full article
… with notable increases among younger, lower-income individuals, particularly women.
• Age:
• Income:
• Gender:
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2. The Conference Board’s leading index declined again, hitting the lowest level since 2016.
As with several other indicators, the leading index has failed to forecast a recession this time around.
Source: @financialtimes Read full article
Source: @MikeZaccardi
Perhaps we could see a recession next year? Goldman’s forecast suggests that won’t be the case.
Source: Goldman Sachs; @MikeZaccardi
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3. The World Economics SMI report suggests that business activity continued to grow this month.
Source: World Economics
4. Major ports have been busy as importers frontloaded purchases this year.
Source: @economics Read full article
5. Business startup activity remains elevated.
Source: @JustinWolfers
6. The federal budget deficit remains high despite strong economic growth, primarily due to elevated interest expenses.
Source: VanEck Read full article
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Europe
1. The euro has been rallying, …
… and markets anticipate further upside for the bloc’s currency if Powell delivers dovish comments at Jackson Hole this week.
2. Longer-term inflation expectations have been falling.
Source: Simon White, Bloomberg Markets Live Blog
3. The impact of Germany’s nuclear power phase-out has been higher emissions and energy dependence.
Source: @financialtimes Read full article
Source: @DanielKral1, @OxfordEconomics
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Asia-Pacific
1. Taiwan’s GDP growth remained solid in Q2, with the economy expected to maintain robust expansion.
Source: @economics Read full article
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2. Asian currencies have been rallying against the dollar.
Here is the South Korean won and the Taiwan dollar.
Source: @TheTerminal, Bloomberg Finance L.P.
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China
1. Portfolio assets’ share of net international investment position (NIIP) has fallen, suggesting less propensity to repatriate assets, according to Barclays.
Source: Barclays Research
• Foreign ownership of Chinese government bonds has declined.
Source: Barclays Research
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2. The World Economics SMI report shows growth in services and contraction in manufacturing this month.
Source: World Economics
3. Here is a look at China’s top smartphone makers by unit shipments.
Source: @technology Read full article
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Emerging Markets
1. India’s business activity growth remained robust in August, according to the World Economics SMI report.
Source: World Economics
• India’s financial sector has been experiencing rapid employee turnover.
Source: @wealth Read full article
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2. Chile’s GDP contracted last quarter.
Source: @economics Read full article
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3. The Brazilian real has weakened under Lula’s third term.
Source: @bpolitics Read full article
4. Here is a look at EM economies’ share across key metrics.
Source: BofA Global Research
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Cryptocurrency
1. Bitcoin is testing resistance at the 50-day moving average.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Speculative demand for bitcoin has been deteriorating.
Source: @crypto Read full article
3. Crypto funds saw minor inflows last week, although Solana-focused funds experienced the largest outflows on record. (2 charts)
Source: CoinShares Read full article
Source: CoinShares Read full article
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Energy
1. Energy shares (XLE) have been outperforming oil prices (USO), …
… as hedge funds boost positions in the energy sector.
Source: Goldman Sachs; @WallStJesus
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2. Gasoline futures continue to sink, signaling lower prices at the pump.
Source: @TheTerminal, Bloomberg Finance L.P.
3. US natural gas is rebounding amid declining inventories (see chart).
4. Here is a look at US energy intensity across fossil fuels.
Source: JP Morgan Research; @carlquintanilla
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Equities
1. The S&P 500 and Nasdaq 100 have been up for eight days in a row.
2. Market correlation to economic data surprises has been positive, as investors focus more on growth than interest rates (2 charts).
Source: @mikamsika, @Bloomberg
Source: BofA Global Research; @MikeZaccardi
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3. Here is a look at sector earnings growth estimates for 2024 and 2025.
Source: Morgan Stanley Research; @WallStJesus
• Goldman is less optimistic than the market about the 2025 EPS growth.
Source: Goldman Sachs; @MikeZaccardi
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4. The market has been more generous to firms beating EPS and sales estimates.
Source: @KevRGordon
5. Some long-term valuations look frothy.
Source: @WSJ Read full article
6. Companies started discussing the election much earlier in this cycle than in previous ones.
Source: Goldman Sachs; @MikeZaccardi
7. US quality stocks typically perform well during late-cycle and recessionary periods.
Source: Tema ETFs
8. Financials could benefit from a steepening yield curve.
Source: @GinaMartinAdams
9. Short interest in SPY and QQQ ETFs, two of the most liquid equity securities, remains depressed.
Source: JP Morgan Research; @WallStJesus
10. Next, we have some updates on the volatility markets.
• Investors are focused on Powell’s upcoming comments at Jackson Hole later this week. Here is the short-term volatility curve.
• Investors loaded up on inverse-VIX ETFs after the vol spike earlier this month.
• VIX options volume surged this month.
Source: @GunjanJS
• The Nasdaq 100 implied vol remains elevated relative to the S&P 500 vol.
Source: @markets Read full article
• Technicals suggest the extended low-vol period has matured, similar to 2014 and 2018.
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Alternatives
1. US venture capital deal volume and cash raised have troughed.
Source: Carta
• There has been a sharp increase in US VC down rounds since the initial rate hike.
Source: PitchBook
• Median IRRs for US VC deals have been negative in recent years.
Source: Carta
• A lot of startups have been shutting down.
Source: @financialtimes Read full article
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2. US GPs are still holding out for a better investment climate as buyout distribution yields lag the S&P 500 return, according to PitchBook.
Source: PitchBook
3. Here is a look at US private capital returns. Real estate and VC assets have been a drag over the past year.
Source: PitchBook
4. Finally, we have private debt allocations by institution type.
Source: Private Debt Investor; @theleadleft
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Credit
1. Yields on corporate high-yield debt hit the lowest level since 2022.
2. High yield spreads are tight relative to the Treasury market implied vol.
Source: @TheTerminal, Bloomberg Finance L.P.
3. Amend-and-extend activity in the US leveraged loan market declined last month from a record-setting tally in June.
Source: PitchBook
4. Nonperforming loans on US bank commercial real estate are rising but remain below 25-year averages.
Source: Moody’s Investors Service
5. There is a lot to talk about PIK lately.
Source: @markets Read full article
6. All securitized products saw an increase in issuance this year.
Source: Deutsche Bank Research
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Global Developments
1. This chart shows inflation relative to central bank targets.
Source: Moody’s Investors Service
2. Global economic surprises have deteriorated.
Source: Goldman Sachs; @MikeZaccardi
3. Here is the breakdown of global debt by security type.
Source: BofA Global Research
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Food for Thought
1. COVID-era surge in business insurance costs:
Source: Reuters Read full article
Changes in business insurance costs this year:
Source: @WSJ Read full article
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2. Goldman’s Q2 performance:
Source: @genuine_impact
3. Market share of major US grocery retailers:
Source: @business Read full article
4. Western airlines face a disadvantage over Chinese airlines due to Russian airspace restrictions.
Source: Reuters Read full article
5. Support for term limits for Supreme Court justices:
Source: @CivicScience Read full article
6. Countries with the highest prison population per 100k inhabitants:
Source: Statista
7. Travelers’ favorite airplane seats:
Source: @axios Read full article
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