The Daily Shot: 21-Oct-24
• The United States
• The United Kingdom
• The Eurozone
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought
The United States
1. Let’s begin with the housing market.
• Homebuilder sentiment showed some improvement this month.
Source: Reuters Read full article
• Housing turnover has been slowing as homeowners hold on to their low-rate mortgages. Once rates decrease further, some of this pent-up supply is expected to flow back into the market.
Source: @axios Read full article
• Inventories of newly completed but unsold homes have been increasing.
Source: @RickPalaciosJr
• Residential construction of single-family homes remained strong last month, well above 2023 levels.
– However, multifamily housing construction slumped as rent inflation cooled. Multi-family building permits fell to their lowest level in years.
– The seasonally adjusted charts below illustrate the divergence between single-family and multifamily construction activity.
Source: @TheTerminal, Bloomberg Finance L.P.
Source: @economics Read full article
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2. Rate-cutting cycles can lead to a wide range of economic outcomes.
Source: MarketDesk Research
3. The U.S. economy is running above its potential. This could indicate either higher-than-estimated potential growth driven by improved productivity or the possibility of firmer inflation in the near future.
Source: @DavidBeckworth
4. The expiration of the 2017 tax cuts (TJCA) could lead to a fiscal shock as taxes rebound.
Source: BofA Global Research; @MikeZaccardi
5. The federal deficit hit $1.8 trillion in the 2024 fiscal year, …
Source: Reuters Read full article
… as federal interest expense surges.
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The United Kingdom
1. Last month’s retail sales topped expectations.
Source: @financialtimes Read full article
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2. Rightmove’s index of housing asking prices has been underwhelming.
Source: Reuters Read full article
• Mortgage approvals and household credit have troughed.
Source: PGM Global
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3. The relative price ratio between FTSE small-caps/large-caps has closely tracked movements in GBP/USD.
Source: PGM Global
• FTSE small-cap dividend yields are well above their large-cap peers.
Source: PGM Global
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The Eurozone
1. What’s next for the ECB? Here are a couple of forecasts.
• Capital Economics (terminal rate = 2.5%):
Source: Capital Economics
• Wells Fargo (terminal rate = 2.0%):
Source: Wells Fargo Securities
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2. Economic slack points to softer inflation ahead.
Source: BCA Research
3. Forecasters surveyed by the ECB have further downgraded their near-term CPI estimates this quarter.
Source: ECB
– Forecasters are confident that the ECB will successfully guide inflation to 2% over the long term.
Source: ECB
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4. This chart shows ECB policy decisions alongside oil price changes.
Source: Deutsche Bank Research
5. Construction output deteriorated further in August.
6. Here’s a look at the short-term rate probability distribution by the end of 2025, according to the options market.
Source: @davidjpowell24; @TheTerminal, Bloomberg Finance L.P. Read full article
7. Next, we have euro-area net fund flows by type.
Source: Arcano Economics
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China
1. Beijing instructed China’s banks to cut key rates.
Source: @WSJ Read full article
• There is room to cut rates further.
Source: Capital Economics
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2. Industrial production topped expectations last month.
Utilities provided a boost.
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3. Retail sales were also stronger than expected.
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4. Household income growth rebounded while spending growth decelerated.
Source: Deutsche Bank Research
5. Fixed asset investment has stabilized.
Source: Deutsche Bank Research
6. Nordea’s activity tracker signals some weakness in GDP growth ahead.
Source: Nordea Markets
7. Deutsche Bank has a Q4 growth forecast at 5% YoY with upside potential if the government implements additional stimulus measures within the next few weeks. An expansionary fiscal stance could support growth next year, although there is downside risk from potential US tariffs.
Source: Deutsche Bank Research
8. RMB implied volatility keeps grinding higher ahead of the US elections.
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Emerging Markets
1. Mexico has imported more goods from China, which contributed to a growth trade deficit. (2 charts)
Source: TS Lombard
Source: TS Lombard
• Mexico’s remittances have significantly grown as a percent of GDP in recent years. Therefore, a US tax on remittances could destabilize Mexico’s macro outlook, according to TS Lombard.
Source: TS Lombard
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2. India’s economic growth is starting to slow.
Source: Abhishek Gupta; @TheTerminal, Bloomberg Finance L.P. Read full article
3. Malaysia’s GDP growth is holding up well.
4. This heatmap illustrates various countries’ exposure to China.
Source: Wells Fargo Securities
5. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity ETFs:
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Cryptocurrency
1. Bitcoin has been testing resistance at $70k, …
… with fund inflows surging (partly driven by bets on a potential Trump victory in the upcoming US election).
Source: Deutsche Bank Research
2. South Korean retail investors’ demand for bitcoin has been soft.
Source: @crypto Read full article
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Commodities
1. Gold hit its 39th record high of the year.
Source: @markets Read full article
• Gold has been above its 200-day moving average for 261 trading sessions in a row.
• So far, 2024 has been the best year for gold this century.
• Gold ETF holdings are starting to rise alongside central bank holdings.
Source: Aazan Habib, Paradigm Capital
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2. Silver hit its highest level in over a decade, …
… as silver futures broke above a long-term downtrend with improving momentum.
• The silver/gold price ratio held support and is approaching initial resistance.
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3. The equal-weight commodity index is showing improving momentum, especially given price breakouts in precious metals.
Source: Aazan Habib, Paradigm Capital
4. US soybean futures remain under pressure.
5. How might commodity markets react to a stronger-than-expected stimulus package from Beijing? The AI-generated scenario below shows potential outcomes.
6. Finally, we have some performance data from last week.
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Energy
1. Energy funds continue to see outflows.
Source: Deutsche Bank Research
2. US natural gas in storage remains above the 5-year average.
3. Uranium futures trading volume is surging.
Source: Goldman Sachs; @WallStJesus
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Equities
1. The S&P 500 has posted gains for six consecutive weeks, …
… with 2024 shaping up to be its best year this century.
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2. The momentum factor has outperformed substantially this year.
3. Goldman projects just a 3% annualized gain for the S&P 500 over the next decade, …
Source: Goldman Sachs; @MikeZaccardi
… with the benchmark equity index underperforming bonds.
Source: Goldman Sachs; @MikeZaccardi
• The reasoning behind this weak performance projection isn’t solely due to lofty valuations but also the excessive concentration within the S&P 500.
Source: Goldman Sachs; @MikeZaccardi
• These concentrations suggest that the S&P 500 equal weight index will outperform (2 charts).
Source: Goldman Sachs; @MikeZaccardi
Source: Goldman Sachs; @MikeZaccardi
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2. Deutsche Bank’s “late cycle” index has been moving higher.
Source: Deutsche Bank Research
3. The S&P 500 is showing signs of long-term upside exhaustion, which previously preceded pauses (range-bound environment) within a cyclical bull market.
Source: @StocktonKatie
4. Have cyclicals bottomed relative to defensives?
Source: Deutsche Bank Research
5. So far in this earnings season, stocks that delivered positive surprises have seen significant gains.
Source: BofA Global Research; @NicholasABrown_
6. Next, we have some performance data from last week.
• Sectors:
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. There are concerns about overvaluation in private credit.
Source: @technology Read full article
Source: @technology Read full article
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2. Here is a look at last week’s performance:
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Global Developments
1. FX market implied volatility, as measured by CVIX, remains elevated compared to realized volatility ahead of the US elections.
Source: Deutsche Bank Research
2. Next, we have some performance data from last week.
• Currencies:
• Bond yields:
• Equity indices:
• USD-denominated equity ETFs:
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Food for Thought
1. Manufacturing share of employment by state:
Source: Deutsche Bank Research
2. Shifts in the US labor market by occupation from 1880 to 2024:
Source: The Aspen Institute Economic Strategy Group Read full article
3. Data-center electricity use propelled by AI:
Source: @BBGIntelligence
4. Anti-religion hate crimes in the US:
Source: CSUSB
5. UK coal consumption:
Source: Carbon Brief Read full article
6. Employment rates of refugees in select economies:
Source: Board of Governors of the Federal Reserve System Read full article
7. Exporters of fresh blueberries:
Source: The Economist Read full article
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