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1. Tender rejections. "This is frightening - tender rejections have collapsed to all-time lows (outside extreme COVID lockdowns) to 3.22% at the end of the quarter!"
2. Banking crisis. “The negative impact on GDP at around 1.25% would be only a third of the roughly 4% decline in GDP during the 2008 financial crisis”…but “the bottom line is that if the ongoing banking crisis results in tighter bank lending standards over the coming quarters, it increases the risks of a harder landing.”
3. Q4 GDP (I). The final QoQ growth estimate came in at "2.6%, exactly where the original Q4 GDP estimate was primarily reflecting downward revisions to exports and consumer spending."
4. Q4 GDP (II). "The Q4 compared to Q3 increase in real GDP reflected increases in inventory investment, consumer spending, business investment, federal government spending, and state and local government spending that were partly offset by decreases in housing investment and exports. Imports, which are a subtraction in the calculation of GDP, decreased."
5. Real consumer spending. "The Personal Consumption number dropped from 2.3% in Q4, and missed the estimate of 1.4% by the widest margin since Q2 2022."
6. Jobless claims. "Initial jobless claims rose 7,000 to 198,000, while the more important 4 week average rose 2,000 to 198,250...Continuing claims, with a one week delay, rose 4,000 to 1,689,000."
7. Bonuses. "The average Wall Street bonus plummeted 26% last year as a slump in dealmaking and banks’ efforts to contain costs weighed on compensation."
8. Interest rates. "Traders expect the central bank to lower its target for the federal funds rate to 4.25-4.50% by December 2023, down from 4.75-5.00% at present."
9. Banks vs. US02Y. "KBW Bank Index (blue) and 2y U.S. Treasury yield (orange) tied at hip … rolling 20-day correlation has surged to highest since February 2020."
10. Stocks vs. bonds. "The rolling one-year correlation between [global stocks and bonds] is near its highest since 1997."
11. Money markets vs. SPX. "Lots of focus on fact that money market mutual fund assets (blue) have surged to new high, but as a % of S&P 500 market cap (orange), share is still below COVID bear market level."
12. Implied volatility. "Implied volatility remains elevated by the norms of the QE era, particularly in fixed income and FX."
13. Commodities vs. SPX. "Relatively speaking, commodities are the cheapest they have ever been compared to the S&P 500."
14. Low liquidity. "The liquidity of the market confirms a volatile environment. Less liquidity = higher vol, smaller volumes create more price noise."
15. Money market flows. "We expect flows into money market funds to grow by several hundred billion dollars...we are in a midst of a two-stage shift...the second stage is emerging now."
16. Hedge funds vs. tech (I). "Hedge Funds are most notably overweight GOOGL, META, AMZN and NFLX, while underweight AAPL, TSLA and NVDA (data as per end January)."
17. Hedge funds vs. tech (II). "HF buying of Mega Cap Tech was a very strong theme earlier this month. Broader combined Tech flows have also been quite strong and are back at highs."
18. Hedge funds vs. tech (III). "HF net exposures in Tech have risen quickly YTD but are still not at extremes."
19. Hedge funds vs. tech (IV). "Info Tech’s weight among sector ETFs is back near highs."
20. Big tech vs. SPX. "Big tech is heading for its strongest month vs. the rest of the S&P 500 in almost 12 years. Without big tech, the S&P would be down 0.7% (vs. up 1.5% like it is now)."
21. Liquidity vs. tech. "Nasdaq heads for one of its best quarters in a decade, up 17% in Q1. Second only to 2020’s Q2 30% rally on the monumental monetary easing during Covid. Both times, the Fed's balance sheet expanded. Latest 10% leg up on the Nasdaq coincided with Fed’s balance sheet adding $400bn."
22. Active managers. "NAAIM Exposure at 65. Was 42 two weeks ago."
23. Cyclicals vs. defensives. "The level of HF positioning in Cyclicals vs. Defensives is approaching early 2020 lows."
24. REIT flows. "The recent relative selling of Real Estate ETFs approached one of the most extreme levels of the past 10+ years."
25. Beta adjusted leverage. "US equity beta-adjusted net leverage is near all-time low now, which in plain terms means that HFs own defensive names."
26. Factor performance. "High-growth high-margin stocks have outperformed."
27. SPX vs. last tightening. And finally, "if the Fed is done raising rates and takes a dovish pivot soon, as many expect, it could be a bullish development for stocks (lower cost of capital). But historically, the final Fed tightening produces anything but a clear-cut direction for stocks."
Thanks for reading!
Can you please explain what the “Tender Rejection” chart is telling? Sorry I have not seen this before. Thanks in advance
I read your charts daily and you do an amazing job and provide a great service