Daily Chartbook #130

Welcome back to Daily Chartbook: macro market charts, data, and insights pulled from various sources around the Internet by a solo retail investor.

1. Oil price puzzle. "The lack of any meaningful bounce in oil prices is the biggest puzzle in global markets. OPEC+ production cut didn't yield a bounce. Neither did the G7 cap and neither is China reopening now. The answer to this puzzle: a very strong global recession dynamic is weighing on demand".

2. Bullish oil investors. "Portfolio investors have piled into petroleum futures and options at the fastest rate since the first successful coronavirus vaccines were announced in late 2020".

3. PCE forecast. "Goldman Sachs expects negative goods inflation in 2023".

4. Loose financial conditions. "US financial conditions are now looser than they were on the eve of the Ukraine invasion. Remarkably, they are even more relaxed than when Fed Funds rate was still effectively zero last March".

5. Hard vs. soft data (I). "While contractionary soft data in January represent a downside risk for Q1 growth, we believe gloomy sentiment is currently distorting the message from business surveys, and we place less weight than usual on this negative growth signal".

6. Hard vs. soft data (II). "Business leaders broadly report deteriorating business conditions, but the breadth of decline reported for actual production, shipments, and employment is more modest — albeit still more negative than during most of the previous economic expansion".

7. Hard vs. soft data (III). "Bear in mind also that it is the labor market alone that is holding up the economic 'signals' as 'soft' survey and 'hard' industrial data is sliding significantly".

8. Dallas manufacturing. "While the headline Dallas Fed Manufacturing Activity Index printed better than expected (-8.4 vs -15.0), it remains in contraction (less than zero) for the 9th straight month (the longest streak since 2016)".

9. Pensions surplus. "US corporate pension plans have their biggest surplus in more than two decades and they will likely use it to buy bonds".

10. ERP. "The US equity risk premium is well below its long-term average. Lower valuations compared with 2022 mean earnings yields are more attractive. However, according to TS Lombard, recession risks and higher Treasury yields put bonds ahead of stocks in terms of risk compensation".

11. Risk-taking. "Morgan Stanley's "Global Risk Demand Index" (STGRDI) has risen sharply and is nearing +3".

12. TIPS outflows. "TIPS are seeing outflows, putting downward pressure on real yields".

13. Hedge funds vs. Treasuries. "Hedge funds are betting this year’s stellar start for Treasuries is too good to last, quietly building up the biggest bearish bet on bond futures on record".

14. Retail net buying. "Retail is back in a big way".

15. Fintwit sentiment. "Equity survey most bullish since Oct".

16. Exposure plans. "Only 18% of survey participants saying they expect to increase their exposure to the S&P 500 in the next month. Over half say they will keep their exposure the same, while some 27% anticipate decreasing it".

17. Bottom? "Roughly 70% of the 383 respondents in the survey say the stock market has yet to hit the bottom".

18. Put/call ratio. "The put/call ratio has been moving lower (reduced risk aversion)".

19. 70s/80s analogy. "Stocks rallied after inflation peaked in the mid 70s and early 80s recessions, even though the economy and earnings continued to weaken".

20. Short seller pain. "Investors betting against stocks have racked up $81 billion of mark-to-market losses on short positions this month through Thursday".

21. Buybacks. "GS estimates that 23% of the SPX will be in open window as of today. Full open window = approx $4bn of VWAP buying every day...And there is more; "announcements" in January have been extra-ordinary".

22. S&P breadth. "Even though S&P 500 (blue) has been rallying over past few months, % of members making new 12-week highs (orange) hasn’t jumped much".

23. Tech earnings. "Tech earnings revisions are on the rise, which may have helped to improve sentiment in the sector recently".

24. Global exposure. International and domestic sales exposure by sector.

25. Q4 earnings (I). Domestic and international blended earnings declines are 3.5% and 7.3%, respectively. Domestic and international blended revenue growth rates are 4.5% and 2.4%, respectively.

26. Q4 earnings (II). "Reactions to earnings have been largely muted so far, with beats outperforming the S&P 500 by just 43bps (vs. +149bps historical average) and misses underperforming by just 96bps (vs. -239bps historical average)".

27. Q4 earnings (III). "Earnings are tracking a 2% miss, driven by Financials".

28. Q4 earnings (IV). And finally, “Consensus expects a 6% earnings decline YoY in 4Q based on current constituents and -10% ex. Energy”.

Thanks for reading!

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MONDAY BONUS: Cheat sheet. Global markets week in review.