Daily Chartbook #235

Welcome back to Daily Chartbook: the day’s best charts & insights, curated.

1. Mortgage rates. "The average 30-year fixed rate mortgage hit 7.07% last week. It surpassed 7% for the first time since November...a level previously [not seen since] 2002."

2. Mortgage demand. Despite the rise in rates, mortgage applications edged up 0.9% last week. Purchase activity is down 26% YoY unadjusted.

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3. Rent prices. "The U.S. rental market has been slowing for more than a year, but the median asking rent is still only $24 below its record high."

4. Supply chain stress. "Collection of metrics that track supply chain stress continue to show significant improvement over past couple years ... average (shown via black line) has plunged deep into negative territory."

5. Intermodal loads. "According to the Association of American Railroads, the intermodal loads carried by US railroads in the first six months of 2023, were down 10.3% from last year and the lowest level for the first half of a year since 2013."

6. Excess savings (I). “We estimate that the top income quintile currently holds just over 80% of excess savings. The 0-20% and 20-40% quintiles have already depleted their excess savings balances, while the 40-60% quintile will likely follow in the next month or so.”

7. Excess savings (II). “Spending by all income quintiles excluding the top one covers about 65% of total consumption.”

8. Recession views. In a Goldman Sachs poll of 900 global institutional investors, "2 out of 3 investors expect the US to fall into a recession in the next 12 months."

9. Lag effect. "The drag on growth from lagged Fed hikes over the coming year will be significant. That is why a recession is a more likely outcome than a soft landing, no matter what happens to inflation."

10. CPI (I). Headline and core CPI each rose by 0.2% in June (vs. 0.3% est). Shelter accounted for +70% of the increase in the former while the latter marked the slowest monthly gain since February 2021.

11. CPI (II). On an annual basis, headline CPI fell to 3% (vs. 3.2% est), the lowest since March 2021. Core CPI fell to 4.8% (vs. 5% est), the lowest since October 2021.

12. CPI (III). "Supercore slowed to 4% on a year ago basis driven by falling medical care prices and easing transportation costs."

13. CPI tracker. "The Cleveland Fed just updated their Median CPI tracker...All 4 metrics decelerated substantially in June on a YoY basis. Notably median CPI was +6.17% vs. prior 6.74%. Still high, but decelerating."

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14. Alt inflation. "Real time headline inflation of 0.16% instead of 3.1%...Our Alt Core inflation = 1.4% instead of official BLS 4.8%."

15. Real earnings. "Average Real Hourly and Weekly Earnings jumped to 1.2% (from 0.2%) and 0.6% (from -0.6%). This should bolster consumer spending without the need to tap savings or credit lines, and should further mitigate recession risk."

16. Weak dollar. "The US dollar has depreciated meaningfully this week and is now at its lowest levels since April 2022. With the end of the Fed's hiking cycle seemingly near, Europe behind the US in its inflation fight, it could still have room to fall."

17. MMF vs. stocks/bonds. "There is still a $5T gap between Money Market Funds + Bonds and equities."

18. CTAs vs. bonds. "CTAs overall allocation to bonds was in the 19th percentile last week."

19. Systematics vs. equities. “Systematic strategies, across CTA, vol-control, and risk-parity, have been re-leveraging and this flow dynamic remains positive correlated with equity indices.”

20. SPX futures positioning. “Current US equity futures position notional length is long +$416 Billion. In Q4, 2022, this number reached a low of-$508 Billion, nearly a ~$1 Trillion change in 3 quarters.”

21. SPX short interest. Median S&P 500 short interest has risen in recent years but remains historically low at 1.8%.

22. Global sentiment (I). "Global investors are very bearish on US stocks."

23. Global sentiment (II). They are most bullish Healthcare stocks over the next 30 days and most bearish Real Estate and Consumer Discretionary.

24. Stock dispersion. “The performance of Russell 1000 stocks has become much more varied relative to the index after the pandemic. We think this helps create investment opportunities.”

25. Sector breadth. "All sectors now have over 50% of issues trading above their 50-day moving averages, except for the defensive sectors of Staples, Health Care, and Utilities. Some of the year's biggest laggards like Energy, Financials, Real Estate, and Industrials have the best short-term breadth."

26. Global breadth. "Measured in local currencies, fewer than half of ACWI markets are above their 200-day averages."

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27. Techy sectors. "As earnings share of the 'techy sectors' has declined further, market cap weighting has… increased!"

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28. Large vs. small P/S. "The largest S&P 500 stocks by market cap (Q5) currently trade at 3.7x sales vs. 1.8x for the smallest (Q1). Q5 is 1.4 std devs expensive than 2015-19 average. Likewise, the 2.7 turn differential between Q5 and Q1 is 2.7 std devs above the pre-pandemic 5 yr avg spread."

29. Quality vs. junk. And finally, “quality” stocks (strong balance sheets, consistent earnings) are at their most expensive relative to “junk” stocks (most at risk of running out of money) in 4 decades.

Thanks for reading!