Daily Chartbook #277

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

1. Logistics. The Logistics Managers Index improved for the first time in 4 months and rose to its highest reading since February.

2. Inflation talk. Q2 saw “the lowest number of S&P 500 companies citing ‘inflation’ on earnings calls going back to Q2 2021.”

3. Consumer expectations (I). "Home price growth expectations have fully normalized and are back at pre-pandemic levels."

4. Consumer expectations (II). One-year ahead inflation expectations increased to 3.6% from 3.5% while three-year ahead expectations ticked down to 2.8% from 2.9%. Five-year ahead inflation expectations moved up to 3% from 2.9%.

5. Consumer expectations (III). "The share of U.S. households reporting that it's harder to obtain credit than one year ago hit a new high in the New York Fed's consumer survey, which is around 10 years old."

6. Lending growth. "Weekly Fed data shows small and large bank lending growth slowing rapidly."

7. Credit upgrades vs. downgrades. "Since the Fed started raising rates the number of downgrades have outnumbered the number of upgrades."

8. Corporate cash. "If profits are now rebounding, boosting confidence that the 'soft-landing' has passed, there is plenty of liquidity to support capex."

9. Household liquidity. "Households are not running out of 'excess savings', far from it. There is still an effective record amount of liquidity on household balance sheets relative to GDP."

10. Consensus. "The consensus expects growth to continue to slow."

11. Consensus vs. Surprise. "The consensus continues to forecast a sharp slowing in growth...leaving room for data to surprise to the upside."

12. Oil inventories. "Global oil inventories are now at their lowest levels since [Kpler] data begins (2017), and we believe will end 2023/2024 at a ~378MM/750MM Bbl deficit relative to a 2017-2019 baseline average."

13. Positioning & Sentiment. "Our positioning and sentiment indicator has reversed some of the bullish shift from the start of the summer, but remains above the 50th percentile with recent signs of stabilization."

14. Equity positioning. Equity positioning is moving closer to neutral.

15. Sector positioning. "Investor exposure across many sectors has also been declining over the last few weeks."

16. Sector fund flows. "Tech (-$1.7bn) saw outflows after ten consecutive weeks of solid inflows...[and] Financials (-$0.7bn) saw outflows again for a sixth successive week."

17. HF trading flow (I). "Overall US equities were net sold [last] week (-0.6SDs one-year), driven by heavy short sales outpacing long buys 1.5 to 1."

18. HF trading flows (II). Hedge fund notional buying was led by "Info Tech, Financials, Consumer Discretionary, and Comm Svcs, while Health Care, Energy, and Consumer Staples were the most net sold."

19. HF short flows (I). Hedge fund "cumulative short flow in US equities at its highest level YTD. [Last] week’s notional short selling was the largest in nearly 6 months."

20. HF short flows (II). "JPM notes that the level of shorts added in the past 4 weeks is getting elevated again."

21. HFs vs. TMT. "Managers net sold US TMT stocks at the fastest pace in 8 weeks, driven almost entirely by short sales."

22. HFs vs. mega-cap tech. Hedge funds are *very* long mega-cap tech.

23. Call volume. "Total net call volume (calls minus puts) declined sharply (5th percentile), as call volume tumbled to near a five-month low."

24. ERP vs. IG spreads. "The S&P 500 equity risk premium (ERP) has fallen below IG credit spreads, underscoring the loftiness of current valuations."

25. Fundamental valuations. "Stocks are historically expensive, at valuations comparable to the eve of the Great Crash in 1929 and of the GFC in 2007."

26. Relative valuations. But, relative to the $SPX, most sector valuations are below their historical averages

27. Cheap Defensives. On a NTM P/E basis, Defensives are very cheap relative to the S&P 500.

28. Late cycle (I). "Interestingly, despite the rate move higher since the local peak in equities in late July, growth has outpaced both value and cyclical."

29. Late cycle (II). "A broad set of early cycle winners have seen relative performance decelerate recently. These developments suggest to us that the internals of the equity market may be growing more skeptical that a macro reacceleration is imminent."

30. Late cycle (III). And finally, “after an attempted broadening out in leadership in May/June that failed, the late cycle barbell is starting to stabilize again and early cycle winners are once again underperforming.”

Thanks for reading!