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1. New home sales (I). "February new home sales +1.1% vs. -3.1% est. & +1.8% prior month (rev down from +7.2%) … third consecutive monthly increase, which hasn’t happened since 2020; median new home price +2.5% year/year to $438,200."
2. New home sales (II). "Year-over-year, new home sales remain down 19%, but on a SAAR basis are back near their highest since last April."
3. New home sales (III). "Months' supply of new homes (blue) was 8.2 in Feb, off its highs but still elevated. Supply changes typically lead y/y home prices (white) by about a year, implying further downside to prices over the next 12 months."
4. Truckload market. "The freight market is teetering on a pretty big development. Tender volumes in the truckload market are on the verge of crossing below 2019 levels. There has been zero sign of any firming in the market as we head into the start of the Spring shipping season."
5. Economic activity. "US economic activity was below trend in Feb via Chicago Fed Nat'l Activity Index, but recession risk still appears low. Nonetheless, all four broad categories of the index posted negative contributions in Feb."
6. Jobless claims (I). "Initial jobless claims declined -1,000 to 191,000 last week, while the more important 4 week moving average declined 250 to 196,250. Continuing claims, with a one week delay, rose 14,000 to 1.694 million."
7. Jobless claims (II). "In 1 out of 5 US States, jobless claims have already risen more than 25% on a YoY basis. The overall number remains contained, but the breadth (blue) is deteriorating to levels which have often preceded recessions."
8. WFH. "Workplace mobility on a national level, as measured by Kastle Systems, has yet to surpass 50% of pre-pandemic levels."
9. CPI vs. Fed funds rate. "If CPI year/year ends up being >5% in March, then number of consecutive months with CPI year/year > fed funds rate would total 28, which is tied for longest stretch on record (last was early 2010s)."
10. Fed fund forecast. "We have left our forecast for the peak funds rate unchanged at 5.25-5.5% and now expect additional 25bp rate hikes in May and June."
11. Quiet capital markets. "Since SVB went under, there has been basically no HY issuance, IG issuance, or IPO activity…and completed M&A activity since Friday, March 10 reflects long-time planned M&A rather than new risk-taking."
12. Dollar debasement. "The dollar's value has steadily eroded as the quality of assets held by the Fed has deteriorated."
13. MOVE vs. credit spreads. "The recent surge in bond volatility suggests that corporate spreads remain too tight and are likely to move significantly higher."
14. Cash allocations. "FMS cash levels remain high and above the long-term average."
15. Sector allocations. Fund managers are most overweight healthcare, staples, and materials; most underweight discretionary, utilities, and tech.
16. Bank bears. "Wall Street is very bearish on banks."
17. Households equity demand. "We forecast households will be net sellers of $750 billion in equities in 2023."
18. Retail selling. "Retail have been selling single stocks during the latest move higher, especially some of the big tech stuff according to JPM…'sold TSLA (-$419MM), GOOG/GOOGL (-$234MM) and AMD (-$216MM)'."
19. NAAIM. Active manager exposure moved up to 53 from 42 last week.
20. Hedge funds. "First the record record short CFTC position in SOFR futures, now the record capitulation. Around 80% of hedge funds' aggregate bet on higher US rates is wiped out in a week. That's got to hurt."
21. Fund flows. "Mutual fund and ETF flows have been **away** from US equities YTD."
22. Asset class yields. "Fixed income far more attractive than equities, and especially US equities."
23. Earnings & margin. "Trailing earnings are flatlining, while expected earnings are coming down. Margins are contracting but remain at pre-COVID levels (12%)."
24. Earnings contractions (I). "Earnings Pessimism = Reason for Optimism...Negative earnings growth is in the bullish mode for the S&P 500, while the U.S. beat rate is stable with reversing momentum."
25. Earnings contractions (II). Counter argument: "Earnings contractions are bullish? Dates when forward EPS growth FELL to zero: March 01, January 08, April 15, Oct 2019, January 2023."
26. SPX vs. hike speed. And finally, “this is a fast hike cycle...If we follow the average fast hike cycle it tells us more sideways price action.”
Thanks for reading!
My first read every morning. Very insightful.