The Daily Shot: 07-Nov-24
• Equities
• Credit
• Rates
• Energy
• Commodities
• Emerging Markets
• China
• Asia-Pacific
• Japan
• The Eurozone
• The United States
• Global Developments
• Food for Thought
Equities
1. Stocks had a strong showing on Wednesday after Trump’s victory, with the Dow, S&P 500, S&P 600, and Nasdaq 100 all reaching new highs.
• The Dow and the S&P 500 had their best day since 2022.
• It was the best post-election session for stocks on record.
Source: @markets Read full article
• The S&P 600 (small caps) finally surpassed its 2021 record high, marking its largest one-day gain since 2020.
– The percentage of S&P 600 members trading above their 200-day moving average has risen above 75%.
– Small caps received a boost from a surge in regional banks, driven by expectations of softer-touch regulation.
Source: @TheTerminal, Bloomberg Finance L.P.
• The Nasdaq 100 hit its first record high since July.
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2. The Dow Transportation index jumped by more than 5%, breaching its previous high set in 2022.
3. US stocks massively outperformed global peers
4. Cyclicals are surging relative to defensives.
5. Consumer discretionary stocks had the best day relative to staples since 2020, boosted by Tesla.
6. Shares of companies focused on or benefiting from onshoring surged relative to those with substantial offshoring operations.
Here are a couple of examples.
– Onshoring:
– Offshoring:
Source: @WSJ Read full article
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7. Vaccine manufacturers took a hit.
Source: @WSJ Read full article
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6. Shares of private prisons surged (2 charts).
Source: @WSJ Read full article
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7. The environment for IPOs is improving, according to Goldman, …
Source: Goldman Sachs; @MikeZaccardi
… as post-IPO shares outperform.
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8. VIX tumbled, …
… with potentially more declines ahead.
Source: Chris Murphy, Susquehanna International Group
• The S&P 500 volatility skew dropped sharply.
Source: @TheTerminal, Bloomberg Finance L.P.
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9. If Trump follows through on his promise to implement broad tariff hikes-up to 60% on Chinese goods, 20% on other imports, and targeted tariffs as high as 200% on specific companies-US equity sectors could be significantly affected. Based on recent experiences with tariffs and trade wars, here’s an AI-assisted scenario analysis of how different sectors might respond over the next 6–12 months. However, most analysts anticipate that the final tariff increases will be less severe, expecting Trump to rely more on negotiations.
Here is a model estimate of the potential aggregate tariff increase from Bloomberg Economics.
Source: @MaevaDebarge, Bloomberg Economics Read full article
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10. Finally, let’s take a look at Wednesday’s performance across market segments.
• Sectors:
– Comparison to 2016:
Source: @bespokeinvest Read full article
• Equity factors:
• Macro basket pairs’ relative performance:
• Thematic ETFs:
• Largest US tech firms:
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Credit
1. Munis took a hit on Wednesday as the outlook for lower taxes and higher deficits makes muni debt less attractive.
Source: @WSJ Read full article
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2. Some $60 billion worth of corporate bonds may be downgraded to junk next year.
Source: @markets Read full article
3. Here is a look at Wednesday’s performance.
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Rates
It was a rough day for long-dated Treasuries.
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Energy
1. US crude oil inventories climbed last week. Refined product stockpiles also unexpectedly increased.
Here are the inventory levels.
– US crude oil inventories measured in days of supply are low.
• Refinery runs have been strengthening.
• Gasoline demand eased last week.
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2. Here is a look at China’s dominance in clean energy tech.
Source: IEA Read full article
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Commodities
1. Precious metals declined as the dollar surged on Wednesday.
Source: @WSJ Read full article
2. Copper also took a hit on US dollar gains.
3. Lumber continues to rally.
4. Here is a look at Wednesday’s performance.
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Emerging Markets
1. Brazil’s central bank raised rates by 50 bps amid strong economic growth (boosted by fiscal stimulus) and persistent inflation. Some global central banks (including the Fed) see this reversal as a nightmare scenario, risking a loss of credibility.
Source: Financial Post Read full article
• Brazil’s exports were a bit softer than expected.
The trade balance is back to more typical levels.
• Brazil’s vehicle sales hit a multi-year high.
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2. Mexico’s vehicle exports reached a record high amid robust US demand.
3. The Philippine GDP growth was softer than expected.
Source: Nikkei Asia Read full article
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4. Hungary’s industrial output remains well below last year’s levels.
5. Next, we have some performance data for Wednesday.
• Currencies:
• Equity ETFs:
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China
1. China’s trade surplus unexpectedly hit a record high for October, likely raising some eyebrows in the West.
• Exports (new high):
• Imports (below 2023 levels):
Source: CNBC Read full article
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2. The renminbi has weakened against the dollar, but the currency rose in trade-weighted terms in recent weeks.
Source: Capital Economics
3. Deflationary dynamics intensified in Q3.
Source: Gavekal Research
4. This chart shows the components of China’s total government debt.
Source: @markets Read full article
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Asia-Pacific
1. Taiwan’s inflation surprised to the downside.
Source: @economics Read full article
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2. Australia’s trade surplus declined to the lowest level since 2020.
Source: Investing.com Read full article
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Japan
1. Workers’ base salary growth reached the highest level in 31 years.
Source: @economics Read full article
However, real cash earnings were below last year’s levels in September.
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2. Tokyo office vacancies continue to ease.
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The Eurozone
1. The final services PMI was revised higher.
Here is Italy’s services PMI.
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2. Germany is heading for snap elections.
Source: Reuters Read full article
• Germany’s factory orders improved in September, but industrial production weakened (more on this tomorrow).
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3. Shares of auto manufacturers tumbled on news of Trump’s victory.
• Germany ships a significant number of cars to the US, …
Source: @markets Read full article
… and a large portion of German cars made in the US are exported. This could pose challenges if other countries retaliate against US tariffs.
Source: @markets Read full article
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4. The euro area money supply is recovering. Foreign inflows are the main source of money creation, while the contraction of the Eurosystem balance sheet and phasing out of TLTRO funding has weighed on money creation, according to the ECB.
Source: ECB
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The United States
1. The yield curve has been steepening as long-term yields rise.
2. Financial conditions eased on Wednesday as higher stock prices, tighter credit spreads, and lower implied volatility offset the impact of rising yields and a stronger US dollar.
3. Market-based inflation expectations surged on anticipated accommodative fiscal policy under Trump.
4. Next, we have some updates on the housing market.
• Mortgage applications for home purchases declined last week amid elevated mortgage rates.
Here is the rate lock count.
Source: AEI Housing Center
– Refi activity deteriorated again.
• Further weakness in lending activity is likely in the days ahead as mortgage rates continue to surge.
Source: Mortgage News Daily
• CoreLogic expects home price appreciation to slow further.
Source: CoreLogic
• Active listings continue to climb.
Source: AEI Housing Center
• This chart shows built-for-rent housing starts.
Source: Calculated Risk
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5. Rent inflation in the Northeast remains elevated, while southern and western states experienced declines over the past year.
Source: Bank of America Institute
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Global Developments
1. Has the global industrial cycle bottomed?
Source: Oxford Economics
2. Here is a look at Wednesday’s market performance.
• Currencies:
• Bond yields:
• Equity ETFs:
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Food for Thought
1. Thanksgiving holiday shopping intent:
Source: @CivicScience Read full article
2. Student loan borrowers’ expectations for credit score changes over the next 6 months:
Source: @CivicScience Read full article
3. How Alphabet makes money:
Source: @Mayhem4Markets
4. Google search activity for “moving to Canada”:
Source: Google Trends
5. This is the first time since the late 1800s that an incumbent party in the White House has lost three consecutive presidential elections.
Source: Deutsche Bank Research
6. Demographic shifts in support for Trump since 2020:
Source: @financialtimes Read full article
7. Frequency of Mexican food consumption among US adults:
Source: @CivicScience Read full article
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