Americans front-run expected tariff-driven price increases

The Daily Shot: 23-Dec-24
Administrative Update
The United States
Canada
The United Kingdom
The Eurozone
Europe
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Credit
Rates
Global Developments
Food for Thought



 

Administrative Update

Please note that The Daily Shot will not be published on December 25th, 26th, and 27th. Abbreviated issues will be available on the 30th and 31st.


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The United States

1. Consumer spending on durable goods surged in November, …
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
… as Americans sought to front-run tariff-driven price hikes (2 charts).
 
Source: Pantheon Macroeconomics  
 
Source: University of Michigan  
 
Companies are also gearing up for higher tariffs.
 
Source: Torsten Slok, Apollo  
 
This chart shows real household income, excluding government payments.
 

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2. The PCE inflation measure was softer than expected in November (2 charts).
 

 

 
Source: Reuters   Read full article  
 
Here is the supercore PCE price index.
 

 
Business inflation expectations have been trending lower.
 
Source: Federal Reserve Bank of Atlanta  
 
US stocks jumped on Friday in response to softer inflation readings.
 

 
Expectations for next year’s Fed rate cuts increased.
 

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3. US financial conditions tightened last week.
 

 
4. This chart highlights a demographic shift favoring homeownership over renting over the next five years. While apartment renters are projected to decline by 2.9%, homebuyers and motorhome/RV owners are expected to grow by 5.8% and 6.1%, respectively. Senior housing demand is set for the most significant increase at 76.7%, driven by aging baby boomers.
 
Source: Barclays Research  
 
5. Federal spending reached $6.8 trillion in FY 2024, with mandatory programs like Social Security ($1.4 trillion) and Medicare ($870 billion) dominating. Discretionary spending, including defense, comprises just 6.3% of GDP. With such entrenched spending allocations, cuts won’t come easily.
 
Source: Wells Fargo Securities  
 
Social Security, Medicare, and Medicaid account for nearly 70% of mandatory spending. With these programs largely “untouchable,” any meaningful budget cuts face steep political barriers.
 
Source: Wells Fargo Securities  
 
Outlays for Social Security and Medicare are projected to surge as a share of GDP amid an aging population.
 
Source: Wells Fargo Securities  


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Canada

1. Retail sales improved in October, though the estimate for November suggests flat growth.
 

 
October’s gains were driven by robust vehicle demand, …
 

 
… with minimal growth outside of the automotive sector.
 

 
Source: @WSJ   Read full article  

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2. Elections before April?
 
Source: Polymarket  


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The United Kingdom

1. Retail sales growth stalled last month.
 

 
2. Government borrowing was lower than expected in November.
 

 
Source: Reuters   Read full article  

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3. The Lloyds Bank business sentiment indicator continues to move lower.
 

 
4. According to the CBA, retail sales remained in contraction territory this month, with businesses rapidly reducing orders to suppliers.
 

 
5. First-time homebuyers in the UK increasingly rely on parental financial help.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. Consumer confidence declined again this month.
 

 
Here are Italy’s sentiment indicators.
 

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2. Dutch home price appreciation keeps accelerating.
 

 
3. Here is a look at government borrowing costs.
 
Source: @financialtimes   Read full article  


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Europe

1. Let’s begin with Sweden.
 
Retail sales declined last month.
 

 
Wage growth has been moderating.
 

 
Consumer confidence declined this month while manufacturing sentiment was roughly flat.
 

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2. Denmark’s consumer sentiment is rolling over.
 

 
3. European stocks continue to widen their underperformance vs. the US.
 

 
Goldman’s GRANOLAS basket, comprising European companies with strong competitive advantages in their sectors, has been underperforming the broader market.
 

 
Source: @markets   Read full article  

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4. Here is a look at seaborne goods handled in EU ports by type and total weight.
 
Source: Eurostat   Read full article  


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Asia-Pacific

1. BofA’s private clients have been cutting their exposure to Japanese stocks.
 
Source: BofA Global Research  
 
2. South Korea’s exports hit a new high this month.
 

 
Nonetheless, the won continues to weaken.
 

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2. New Zealand’s exports were very strong last month.
 

 
3. Australian dollar futures positioning shifted sharply into bearish territory last week.
 

 
Australian inflation expectations increased this month.
 

 
Private credit growth has been picking up momentum.
 


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China

1. Beijing is holding firm on USD/CNY at 7.3 for now.
 

 
2. Bond yields continue to drift lower.
 

 
3. The SMI manufacturing survey shows factory activity in growth mode this month.
 
Source: World Economics  
 
4. Here are the drivers of China’s disinflationary pressures.
 
Source: @economics   Read full article  


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Emerging Markets

1. Brazil’s consumer confidence declined this month.
 

 
Economists have been boosting their forecasts for Brazil’s inflation next year, …
 

 
… which will keep rates elevated.
 

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2. Argentina’s economic activity expanded in October.
 

 
Economists are lowering their forecasts for Argentina’s inflation next year.
 

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3. Colombia’s central bank unexpectedly slowed the pace of rate cuts.
 

 
Source: @economics   Read full article  

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4. Russia’s oligarchs pressured the central bank to keep rates unchanged last week.
 

 
Source: @WSJ   Read full article  
 
Economists continue to boost their estimates for Russia’s inflation and rates next year.
 

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5. Next, we have some performance data from last week.
 
Currencies:
 

 
Bond yields:
 

 
Equity ETFs:
 


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Cryptocurrency

1. Bitcoin is testing support at its 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. Here is a look at the month-to-date performance across selected cryptos.
 

 
3. Bitcoin ETFs see some outflows.
 
Source: @crypto   Read full article  
 
4. Tether continues to dominate the stablecoin market.
 
Source: @technology   Read full article  


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Commodities

1. Traders continue to press their bets on cattle futures.
 

 
2. Wholesale egg prices hit a record high.
 

 
Source: @markets   Read full article  

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3. Here is a look at last week’s performance.
 


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Energy

1. US fracking activity has been trending lower.
 

 
2. US natural gas futures continue to surge.
 

 
3. Here is a look at US LNG exports by destination.
 
Source: Goldman Sachs; @MikeZaccardi  


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Equities

1. Market breadth improved on Friday.
 

 
2. The S&P 500 risk premium remains near the lowest levels in over two decades.
 

 
3. The average S&P 500 stock has further widened its performance gap relative to the index.
 

 
4. More S&P 500 stocks have reached new one-year lows, with the index near its high, which typically precedes a period of market weakness.
 
Source: SentimenTrader  
 
5. Short-term technical measures suggest the S&P 500 is oversold.
 
Source: MarketDesk Research  
 
However, longer-term breadth readings have weakened from peak levels.
 
Source: Damanick Dantes; Bloomberg  

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6. US value stocks experienced a historic losing streak versus growth stocks.
 
Source: SentimenTrader  
 
7. From its 1996 peak to 2022, the number of publicly listed U.S. companies declined by 43%, in stark contrast to international markets.
 
Source: @WSJ   Read full article  
 
8. Here is a look at 3-month global EPS revisions by sector.
 
Source: Goldman Sachs; @WallStJesus  
 
9. Finally, we have some performance data from last week.
 
Sectors:
 

 
Equity factors/styles:
 

 
Macro basket pairs’ relative performance:
 

 
Thematic ETFs:
 

 
Largest US tech firms:
 


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Credit

1. Commercial real estate prices have stabilized, …
 
Source: @wealth   Read full article  
 
… improving funding liquidity.
 
Source: @wealth   Read full article  

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2. US leveraged loan issuers continue to reprice and refinance existing credits toward the year-end.
 
Source: Deutsche Bank Research  
 
3. Here is last week’s performance by credit asset class, impacted by weakness in the Treasury market.
 


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Rates

1. Bond funds saw record inflows this year.
 
Source: @financialtimes   Read full article  
 
2. The Fed’s adjusted RRP rate aligns more closely with Treasury bill yields.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Source: @markets   Read full article  


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Global Developments

1. What do fund managers see as the best performing asset class next year?
 
Source: BofA Global Research  
 
2. Goldman expects rate cuts to continue in 2025.
 
Source: Goldman Sachs; @MikeZaccardi  
 
3. M&A activity is starting to rebound.
 
best-performing
 
4. Finally, 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. Comparing historical asset price booms to the Magnificent 7 tech stocks:
 
Source: Alpine Macro  
 
2. Global ocean-going cruise passenger growth:
 
Source: @chartrdaily  
 
3. Spotify financial performance for Q3 FY2024:
 
Source: @genuine_impact  
 
4. Growth in scientific papers published globally and per researcher in OECD countries:
 
Source: The Economist   Read full article  
 
5. Global leaders in AI R&D spending:
 
Source: @genuine_impact  
 
6. EV facilities in Republican congressional districts:
 
Source: @business   Read full article  
 
7. Longest non-stop flights:
 
Source: @theepicmap  
 

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