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Daily Chartbook #311
Catch up on the day in 30 charts
Welcome back to Daily Chartbook: the day’s best charts & insights, curated.
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1. Small biz vs. credit conditions. "Tighter credit conditions for small companies usually precede or accompany sliding profits, which in turn spells lower employment growth."
2. R-Star. "Deutsche Bank’s models show a higher neutral rate."
3. Fed expectations. "The market is almost always wrong about what the Fed will do beyond the next FOMC meeting... it is remarkable how mean reverting the error is. When rates are low...the Fed will soon hike. When rates are high...the Fed is to cut."
4. PCE (I). Both headline and core PCE were in line with estimates, rising by 0.4% and 0.3% MoM in September, respectively. The latter accelerated to the most in 4 months.
5. PCE (II). Headline and core PCE were similarly in line on an annual basis, rising 3.4% and 3.7%, respectively. The latter was the lowest since May 2021.
6. Personal income vs. spending. "Monthly personal spending grew 0.7% (above est of 0.5%), while income grew 0.3% (below est of 0.4%). That's the fourth straight month of spending > income. To do this consumers are either dipping into savings or taking on debt."
7. Personal savings. The personal savings rate dropped sharply, falling to 3.4% from 4%.
8. Wage growth. "Private workers’ wages plunged to 3.9%, down from 4.5% and the lowest since Feb 2021…Wages of govt workers are up 7.8% YoY vs 7.4% in August and approaching the record high of 8.7% in Oct 2021."
9. Inflation expectations. One-year inflation expectations jumped to 4.2% in October (a 5-month high), up from the preliminary 3.8% estimate. Expectations for five-year inflation increased to 3% from 2.8% which was in line with the preliminary estimate.
10. Brent vs. options market. "We estimate that the market now assigns a roughly 5% probability that Brent exceeds $110/bbl in 3 months."
11. Gold flows. Gold saw its first inflow ($0.5bn) since May.
12. Inversion vs. Recession. "The lead time between the Treasury curve inversion and the start of a recession ranges from 3-16 months. However, there is typically a significant re-steepening after max inversion before a recession, particularly in a bear-steepening scenario."
13. HY credit spreads vs. defaults. "High yield credit spreads seem to be immune to rising defaults."
14. HG fund flows. “Outflows from US HG bond funds and ETFs jumped to -$4.52bn this past week ending on October 25, the biggest outflow since December 2022.”
15. UST fund flows (I). "Largest inflow on record to long duration Treasury funds ($5.6bn), biggest inflow to intermediate Treasury funds since Aug'22 ($1.9bn)."
16. UST fund flows (II). "Meanwhile 4-week moving average inflow to short-term Treasuries is slowing."
17. Private client flows. "Private clients continue to sell equities (outflows past 9 weeks) as T-bill purchases drive private client debt to 22.0% of AUM...highest since Jun’20; private clients buying munis, energy, bank loan ETFs, selling IG/HY/EM debt & utilities ETFs."
18. Equity fund flows. "Flows were slightly negative for stocks this past week with a -1.33bn outflow."
19. Retail vs. Magnificent 7. "Retail investors have been buying tech megacaps as prices fall."
20. Bull & Bear Indicator. BofA's Bull & Bear Indicator dopped "to 1.5 from 1.9, lowest since Nov'22, driven by large outflows from HY bonds, global stocks and worsening global equity market breadth."
21. SPX vs. VIX. "Over the past two-plus years, the S&P 500 has rallied 20% when the VIX has been above 28.5 and has fallen 20% when it has been below that level."
22. VIX options volume. "This month, volume in VIX options has climbed to a three-year high, and 60% of that volume is in calls (or contracts that gain if the VIX rises)."
23. Average year. "The average year for the S&P 500 (since 1950) bottoms today."
24. Small-caps low. Lowest close for Russell 2000 $RUT since November 2020.
25. Dividend discount. "Dividend stocks trade at a wide valuation discount to the S&P 500 relative to history, but it is unlikely that this gap will close in the near term. Dividend stocks have underperformed YTD alongside the rise in interest rates."
26. Top dividend yield vs. UST yield. "The gap between the dividend yield of the highest yielding S&P 500 companies and the yield on 10-year US Treasuries has closed completely from 1 pp at the start of May to 0 today."
27. Q3 earnings (I). With 49% of $SPX companies reported, the blended earnings and revenue growth rates are 2.7% and 2.1%, respectively. If realized, the former would mark the first quarter of YoY growth since Q3 2022.
28. Q3 earnings (II). For companies that generate >50% of sales outside the US, the blended earnings and growth rates drop to -4.7% and -2%, respectively.
29. Q3 earnings (III). 56% of companies have beaten earnings estimates by >1SD (hist. avg 48%) and are averaging +136bps (hist. avg +98bps) outperformance in the trading session following reporting. 10% have missed by >1SD (hist. avg 13%) and are averaging -319bps of underperformance (hist. avg -211bps).
30. Analysts' EPS upgrades. And finally, “despite a surge higher in analysts' forward EPS projections, their optimism has not translated into trailing EPS outturns nor by the pace of upgrades, which is middling to poor - and that's even taking account of seasonal preannouncements.”
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