Humanitarian immigrants’ rising contribution to the labor force

The Daily Shot: 22-Jan-25
The United States
Canada
The United Kingdom
The Eurozone
Europe
Japan
Asia-Pacific
China
Emerging Markets
Commodities
Energy
Equities
Alternatives
Global Developments
Food for Thought



 

The United States

1. The Philly Fed’s regional service sector index indicated subdued activity this month.
 

 

 
However, the new orders index moved into positive territory, while the region’s unfilled orders measure climbed to a multi-year high, signaling improving demand.
 

 
Fewer service firms are boosting wages.
 

 
Companies have stopped raising prices this month.
 

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2. The recent surge in both 1-month and 3-month US dollar index (DXY) risk reversals highlights increased demand for dollar calls over puts, fueled by heightened trade uncertainty following new tariff threats. This shift reflects a broader risk-off sentiment in FX markets as investors brace for a potential escalation in trade tensions.
 

 
Source: Reuters   Read full article  

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3. This chart shows Deutsche Bank’s inflation forecasts under different tariff assumptions.
 
Source: Deutsche Bank Research  
 
Separately, here is Bloomberg’s Bacon Egg & Cheese Sandwich Price Index.
 
Source: @M_McDonough  

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4. In December, 16.2% of pending home sales fell through, marking the highest rate on record for the month. This increase suggests growing buyer affordability challenges and tighter financing conditions.
 
Source: Redfin  
 
5. Inflows from humanitarian immigrants (asylum seekers) have contributed a growing share to the labor supply in recent years.
 
Source: Barclays Research  
 
Policies to stem the outflow of asylum seekers could squeeze labor supply and growth, according to Barclays.
 
Source: Barclays Research  


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Canada

1. Canada’s CPI fell back below 2% year-over-year in December.
 

 
Source: Reuters   Read full article  
 
Core inflation also eased.
 

 
Rent inflation remains elevated but has been gradually moderating.
 

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2. The Canadian dollar is still range-bound.
 

 
CAD speculative short positioning is extremely stretched.
 
Source: Aazan Habib, Paradigm Capital  

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3. The 2-year yield differential with the US has reached extreme levels.
 


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The United Kingdom

1. Gilt issuance has been climbing.
 
Source: @markets   Read full article  
 
High taxes and elevated spending have complicated the fiscal backdrop.
 
Source: MRB Partners  
 
This chart highlights the sensitivity of UK debt interest costs to changes in economic variables. A 1% rise in gilt rates has the largest impact, increasing interest costs by around £12 billion, followed by inflation and short rates, underscoring the fiscal vulnerability to rising borrowing costs.
 
Source: Morgan Stanley Research  

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2. UK payrolls are declining at a faster rate than those in the US.
 
Source: Nomura Securities  
 
3. This chart highlights the UK’s rising reliance on foreign workers across industries.
 
Source: @financialtimes   Read full article  


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The Eurozone

1. Germany’s ZEW expectations index surprised to the downside.
 

 
Source: @economics   Read full article  

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2. French retail sales dropped to the lowest level since early 2021 last month.
 

 
3. Rate differentials indicate upside potential for the euro.
 
Source: Longview Economics  


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Europe

1. EU new car registrations climbed above 2023 levels in December.
 

 
2024 sales by company:
 
Source: @business   Read full article  
 
EV sales:
 
Source: @business   Read full article  
 
Separately, here are the EU new car registrations by energy type in 2023.
 
Source: Eurostat   Read full article  

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2. This chart shows China’s rising EU import share driven by EV batteries, electric vehicles, and solar cells.
 
Source: Rhodium Group   Read full article  
 
3. Economists continue to lower their estimates for Swiss inflation in 2025.
 

 
4. This map shows six different socioeconomic clusters across European regions.
 
Source: DOI Foundation   Read full article  
 
5. Extreme rainfall events in Europe have increased significantly since 1980.
 
Source: @DeepSkyCorp  


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Japan

1. USD/JPY is holding support at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
2. The BoJ is expected to hike rates this week.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: @economics   Read full article  


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Asia-Pacific

1. Let’s begin with South Korea.
 
This month’s exports dipped below last year’s levels.
 

 
Consumer confidence edged higher but remains depressed.
 

 
Economists have been lowering their 2025 GDP forecasts for South Korea.
 
Source: @economics   Read full article  

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2. Taiwan’s export orders outperformed expectations in December, rebounding sharply from the low base of 2023.
 

 
Source: Reuters   Read full article  

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3. New Zealand’s Q4 CPI came in roughly as expected, though the “tradables” component was stronger.
 

 
Source: @WSJ   Read full article  


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China

1. USD/CNH (dollar vs. the offshore yuan) is testing resistance at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Source: CNBC   Read full article  

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2. CQQQ, an ETF focused on China’s tech firms, has experienced significant outflows since the U.S. elections.
 

 
3. Corporate profits in China have fallen for three consecutive years, with 2024’s year-to-date decline notably sharp. Meanwhile, 25% of Chinese firms with revenue exceeding Rmb 20mn reported losses, reflecting a rising proportion of loss-making companies amid growing overall totals.
 
Source: @financialtimes   Read full article  


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Emerging Markets

1. Mexican retail sales for November came in below expectations.
 

 
MXN/USD is approaching initial support within a wide trading range.
 

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2. South Africa’s mining output remains well below pre-COVID levels.
 

 
South Africa’s gold production reached a multi-year low in November.
 

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3. Vietnam, Thailand, and Mexico have significantly increased their exports to the US since the 2018 trade war, highlighting the reshuffling of supply chains. As Trump’s trade policies evolve, export-driven Asian economies may face renewed pressure.
 
Source: Sungwoo Park, @TheTerminal, Bloomberg Finance L.P.  
 
Source: Capital Economics  

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4. Improvements in the structural growth index (SGI) can generate exponential gains in GDP per capita.
 
Source: TS Lombard  


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Commodities

1. Let’s begin with some updates on gold.
 
Global gold production has stalled in recent years.
 
Source: Gavekal Research  
 
Gold ETF inflows have surged over the past week.
 

 
Gold appears stretched relative to US wages, …
 
Source: Gavekal Research  
 
… cheap relative to the S&P 500, …
 
Source: Gavekal Research  
 
… and expensive compared with non-US equities.
Source: Gavekal Research  

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2. Sugar prices continue to tumble.
 

 
Source: Reuters   Read full article  

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3. Soybean futures are rebounding.
 

 
Source: Reuters   Read full article  


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Energy

1. Electricity prices have spiked in parts of the US due to frigid weather conditions.
 

 

 
Source: @business   Read full article  

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2. Concerns about US tariffs against Canada have significantly widened the discount of Alberta crude relative to WTI.
 
Source: @SPGCIOil  
 
3. China’s reduced purchases of Russian crude have exerted significant downward pressure on the ESPO crude price differential versus Platts Dubai.
 
Source: @SPGCIOil  


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Equities

1. Market breadth has improved substantially in recent days.
 
% of S&P 500 members trading above their 50-day moving average:
 

 
S&P 500 advancing vs. declining members:
 

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2. Related to the above, the average S&P 500 stock (equal-weight index) and midcaps have outperformed the S&P 500.
 

 
3. Bank shares have performed well this month as fund managers boost allocations (2nd chart below), but regional banks are lagging.
 

 
Source: BofA Global Research  

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4. The S&P 500’s valuation, measured across multiple metrics like P/E, CAPE, and market cap to GDP, is at historical extremes, reaching prior peaks.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
US equity valuations, as measured by 12-month forward P/E ratios, are at 20-year peaks, even when excluding the largest technology companies.
 
Source: Goldman Sachs; @MikeZaccardi  

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5. The US stock market’s massive outperformance over global equities has been primarily driven by stronger earnings growth (fundamentals have anchored this divergence).
 
Source: Goldman Sachs; @WallStJesus  
 
6. Asset manager positioning in the S&P 500 is coming off overbought levels.
 
Source: Aazan Habib, Paradigm Capital  
 
7. Only 29% of S&P 500 companies have outperformed the index over the past two years, one of the lowest levels since 1990.
 
Source: BofA Global Research  
 
8. Fund managers continue to see a long position in the Magnificent 7 as the most crowded trade.
 
Source: BofA Global Research  
 
9. Here is Deutsche Bank’s positioning index by sector.
 
Source: Deutsche Bank Research  


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Alternatives

1. The median time between venture capital fundraising rounds has lengthened across stages.
 
Source: PitchBook   Read full article  
 
The share of funding rounds led by insiders hit a decade high.
 
Source: PitchBook   Read full article  

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2. This graph shows a dramatic shift in the investment management industry from 2010 to 2024. Alternative asset managers have grown from about 20% to 70% of market capitalization, while traditional managers’ share declined significantly.
 
Source: @financialtimes   Read full article  
 
3. Private equity, real assets, and private debt led the way in Q2 2024, while venture capital and real estate lagged but started to improve in Q3.
 
Source: PitchBook  
 
4. LPs overwhelmingly disapprove of using NAV loans for fund-level dividend recaps, reflecting a shift in focus toward reinvestment over short-term payouts.
 
Source: @markets   Read full article  
 
5. Business-to-business products and services accounted for the largest portion of M&A activity in 2024.
 
Source: PitchBook  
 
6. This survey shows strong institutional investor skepticism toward trendy investment sectors: 88% view gaming investments as too risky, with similar high-risk assessments for sports teams/leagues (84%) and music rights (81%). This widespread caution, particularly regarding sports investments, contrasts sharply with Goldman Sachs’ trillion-dollar market prediction. Only 8-9% of investors currently participate in these sectors, with minimal additional interest expected in coming years.
 
Source: Semafor   Read full article  


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Global Developments

1. Retail sentiment on the US dollar is extremely bullish.
 
Source: BofA Global Research  
 
2. Here is a look at household leverage in advanced economies.
 
Source: Torsten Slok, Apollo  


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Food for Thought

1. The US insurance industry’s market value totals $1.7 trillion.
 
Source: Visual Capitalist   Read full article  
 
2. Rocket launches by year:
 
Source: rocketlaunch.org  
 
3. Israel’s manufacturing output:
 

 
4. Top countries by cargo volume through the Panama Canal:
 
Source: The Economist   Read full article  
 
5. Repatriations from the US:
 
Source: @bpolitics   Read full article  
 
6. Bank robberies over time:
 
Source: @Datawrapper  

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