The Daily Shot: 06-Nov-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Europe
• Asia-Pacific
• Emerging Markets
• Commodities
• Energy
• Equities
• Rates
• Food for Thought
The United States
1. Donald Trump has won the 2024 presidential election, and the Senate has flipped to the GOP.
• Betting market probabilities:
Source: Kalshi
• Betting market electoral map:
Source: Kalshi
——————–
2. Let’s examine the market reactions to Trump’s victory.
• The US dollar registered its biggest increase since 2020.
Trump wants to see a weaker US dollar, but markets are bracing for tariff hikes. In response, trading partners’ currencies are adjusting lower to maintain competitive pricing and offset the impact of higher tariffs. The US dollar surged against the Mexican peso, …
… and the Chinese renminbi.
The euro tumbled.
——————–
• Longer-dated Treasury yields jumped in anticipation of more accommodative fiscal policy under Trump (2 charts).
• Stock futures surged on expectations that the 2017 Tax Cuts and Jobs Act will be extended or that corporate taxes could be lowered further under the Trump administration. Anticipation of looser regulations and reduced antitrust activity also contributed to the rally.
• Bitcoin hit a record high.
——————–
3. While the market fully expects a Fed rate cut this month, the situation is now less certain going forward.
The market has priced in 43 bps of Fed rate cuts for this year and only 66 bps for 2025.
Source: @TheTerminal, Bloomberg Finance L.P.
——————–
4. The October ISM Services PMI exceeded expectations, indicating accelerating activity in the service sector.
Source: @LizThomasStrat
• Service firms stepped up hiring.
• Supplier deliveries are taking longer amid robust demand.
• It’s been a while since service sector activity has outpaced manufacturing by this margin.
Source: Wells Fargo Securities
——————–
5. As we saw earlier, the nation’s trade deficit widened sharply in September (this index includes services).
——————–
6. Logistics managers are reporting a pickup in activity.
7. Tech sector outperformance bodes well for productivity improvements ahead.
Source: Jim Paulsen; @dailychartbook Read full article
Back to Index
Canada
1. The services PMI has returned to growth territory.
• Service sector hiring has resumed.
• Input price inflation accelerated last month.
——————–
2. Another BoC jumbo rate cut ahead?
Source: Oxford Economics
3. The trade deficit was wider than expected in September.
4. CAD/USD has been holding support.
5. Canadian equities are improving relative to the world.
Source: PGM Global
Back to Index
The United Kingdom
1. Gilt yields continue to climb (2 charts).
——————–
2. The final UK services PMI for October was revised upward.
3. New vehicle registrations dipped below last year’s levels.
Source: Reuters Read full article
——————–
4. Job postings continue to trend lower …
Source: Vanda Research
… as the employment outlook worsens.
Source: Pantheon Macroeconomics
Back to Index
The Eurozone
1. French factory output eased in September.
The outlook for industrial activity is not promising.
Source: Pantheon Macroeconomics
——————–
2. Fewer firms are reporting labor shortages, though the number remains well above pre-COVID levels.
Source: Capital Economics
3. The availability of mortgage bank credit has significantly improved.
Source: Longview Economics
• Banks reported a consistent rise in mortgage demand.
Source: Longview Economics
——————–
4. EUR/CHF has diverged from the German yield curve inversion.
Source: PGM Global
Back to Index
Europe
1. Sweden’s service sector activity is back in growth mode.
2. The slump in factory activity across Central European manufacturing hubs has been easing.
• Czech Republic:
• Poland:
Back to Index
Asia-Pacific
1. Japan’s economy is likely operating with excess demand.
Source: MRB Partners
2. The yen is under pressure after Trump’s victory.
• Here is Blomberg’s index of Asian currencies (lower = weaker Asian currencies).
——————–
3. New Zealand’s unemployment rate has been rising, …
… with total employment declining for the first time in over a decade.
Wage growth eased in Q3.
Back to Index
Emerging Markets
1. Brazil’s service sector is growing rapidly.
Input price inflation remains elevated.
——————–
2. Argentina’s vehicle sales are holding above last year’s levels.
3. EM bonds are vulnerable to weakness in global industrial demand.
Source: BCA Research
Back to Index
Commodities
1. China’s copper consumption is starting to reverse its downtrend (and exceeding its GDP trend) when smoothing out cyclical gyrations.
Source: Alpine Macro
2. Iron ore is testing support but will require a sustained upturn in Chinese economic activity.
Source: Alpine Macro
3. Here is a look at South Africa’s share of global gold production over time.
Source: Codera Analytics
Back to Index
Energy
1. US crude oil output continues to outpace that of Saudi Arabia.
Source: @TheTerminal, Bloomberg Finance L.P.
2. Japan’s oil consumption has been trending lower.
Source: @JKempEnergy
3. Clean energy stocks have been in a bear market since early 2021.
Source: MRB Partners
Back to Index
Equities
1. With the US dollar surging, here’s an overview of equity sector sensitivity to the dollar.
Source: BofA Global Research; @dailychartbook
2. How does the market usually perform leading up to and following the presidential inauguration?
Source: Simon White, Bloomberg Markets Live Blog
3. S&P 500 at 6,100 by year-end? The options market assigns a 16% probability of such an outcome.
Source: @markets Read full article
——————–
4. Corporate cash holdings as a share of GDP remain elevated.
Source: Goldman Sachs; @MikeZaccardi
5. Here is a look at US corporate profits as a percentage of GDP.
Source: The Economist Read full article
6. Higher VIX levels typically indicate stronger stock performance over the following 12 months.
Source: Alpine Macro
7. How sensitive are US stocks to various global macro indicators?
Source: BofA Global Research; @neilksethi
How have these sensitivities changed over the past five years?
Source: BofA Global Research; @neilksethi
——————–
8. NVIDIA has become the largest company by market capitalization.
Source: @technology Read full article
• Here are the P/E ratios of the top ten companies in the S&P 500.
Source: Torsten Slok, Apollo
——————–
9. Companies focused on or benefiting from onshoring have been outperforming.
10. Next, let’s take a look at forward earnings yields vs. implied volatility (expected performance vs. perceived risk).
• Sectors:
• Equity factors/styles:
• International markets:
Back to Index
Rates
1. Here’s the evolution of foreign Treasury holdings by major holders (region/country).
Source: Truist Advisory Services
2. The 20+ Year Treasury Bond ETF (TLT) has been testing short-term support and is likely to break it today.
——————–
Food for Thought
1. Net interest payments as a share of US federal revenue:
Source: @economics Read full article
2. Student loan forgiveness for public service employees:
Source: WH.gov Read full article
3. Homeschooling:
Source: @financialtimes Read full article
4. Childcare as the reason Americans work part-time instead of full-time:
Source: Bank of America Institute
5. US Google search activity for “change my vote”:
6. Natural and lab-grown diamonds sold in the US:
Source: @axios Read full article
——————–
Back to Index