Daily Chartbook #254

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

1. Shadow banks. "Shadow banks account for nearly half of all financial assets globally...This sector includes investment funds, insurance companies, pension funds and other financial intermediaries...they grew by 8.9% in 2021...reaching $239.3 trillion worldwide."

2. Marginal funding costs. "The Fed’s tightening cycle has pushed marginal funding costs for businesses sharply higher over the past couple of years, with yields jumping 3½pp for investment grade bonds and 4¾pp for high yield bonds."

3. Corporate debt (I). "While near-term refinancing needs appear limited...the pace of corporate debt maturing picks up sharply from 2024 onward."

4. Corporate debt (II). "We estimate that refinancing maturing debt will boost interest expense by 2% in 2024 and 5½% in 2025."

5. Household debt. "Total household debt rose by $16 billion to reach $17.06 trillion in the second quarter of 2023…Mortgage balances…were largely unchanged...Credit card balances increased by $45 billion, a 4.6% quarterly increase, and now stand at $1.03 trillion."

6. Credit card debt. "Credit card debt is just 6% of $$$ people have in the bank, around the lowest %age in 20 years."

7. Delinquency rates. "Aggregate delinquency rates were roughly flat in the second quarter of 2023 and remained low, after declining sharply through the beginning of the pandemic. As of June, 2.7% of outstanding debt was in some stage of delinquency, 2 percentage points lower than the last quarter of 2019."

8. Small businesses (I). "July NFIB Small Business Optimism (blue) rose to 91.9 vs. 91.3 est. & 91 in prior month; outlook (orange) rose to -30 (while still negative, is best level since August 2021) … hiring plans ticked up while expectations for earnings trends worsened."

9. Small businesses (II). "The % of small businesses planning to raise prices just fell to its lowest level since January 2021."

10. Small businesses (III). "Quality of labor has overtaken inflation as single most important problem...taxes starting to creep higher as an issue, but still distant from top two problems."

11. Wholesale sales & inventories. "June wholesale trade sales (blue) -0.7% m/m vs. -0.2% est. & -0.5% prior (rev down from -0.2%)…inventories (orange) -0.5% vs. -0.3% est. & -0.3% prior." 

12. Q3 GDP. The Atlanta Fed's GDPNow estimate for Q3 growth moved up to 4.1% from 3.9% on August 1.

13. Inflation expectations vs UST. 10-year Treasury yields have been tightly correlated with market-implied inflation expectations since 2018.

14. UST buyers vs. sellers. "Reality check for US bonds: the sellers continue to outnumber the buyers."

15. Money-market funds. "Money-market funds are offering the highest yields since **2007**. The yield on 100 of the largest mm funds recently hovered at 5.13%, highest in 16 years."

16. Exposure plans. "Equity exposure/sentiment is ~52nd percentile, on average; 36% plan to increase equity exposure, and 86% to increase bond duration near term."

17. Investor flows. "Some outflows from U.S. equity ETFs last week, concentrated in large caps (small and mid caps saw inflows); investors still put money into bond market, but only in government and agg bond ETFs."

18. Sector positioning. Investors are most overweight Communications (90th percentile), Staples (87th), and Tech (84th). They are most underweight Utilities (26th), Real Estate, (33rd), and Healthcare (33rd). 

19. Sector short interest. Short interest is highest across the Discretionary, Real Estate, and Energy sectors.

20. Sector call volume. Stocks net call volume has declined across sectors in recent weeks.

21. Mutual fund beta. Large-cap mutual fund beta to the S&P 500 remains relatively low.

22. Hedge fund beta. “With a current equity beta of 0.2, hedge funds are about as bearish on stocks now as they ever have been.”

23. SPX vs. PCE. "We saw max put hate just in time for the latest reversal lower. The crowd continues to hate protection when they should love it and vice versa."

24. Seasonality. US stock performance this year has been in line with typical seasonal trends.

25. New highs vs. new lows. "After failing to expand, new highs are now struggling to stay above new lows. If that continues then the recent rise bond yields becomes a more acute risk for equities."

See:

26. Macro vs. micro. "Our research shows that the share of the typical S&P 500 stock’s return explained by micro factors has risen sharply to 71% from 41% a year ago."

27. Profit margins. "S&P 500 profit margins have fallen to the post-1990 trend. Here's the rub though: margins tend to overshoot on the downside during periods of margin compression, and consensus expects margins to expand back to the highs of 1-2 years ago."

28. Forward EPS. "S&P 500 forward 1-year earnings estimates back near an all-time high at $235. At pre-market prices that’d put stocks at 19x forward earnings."

29. Equity valuations (I). "US equity market valuations remain unattractive, in absolute terms, and in a regional context."

30. Equity valuations (II). And finally, “US small-cap valuations are trading outright cheap relative to large caps.”

Thanks for reading!