Daily Chartbook #121

Welcome back to Daily Chartbook: macro market charts, data, and insights pulled from various sources around the Internet by a solo retail investor.

1. US freight. "It's early - but data and channel checks suggest that the freight market may be stabilizing. If this trend continues through the quarter, it would suggest that Q4 22 was the cycle low and clearer skies are ahead".

2. Business applications. "Total Business Applications in December 2022 were 417,055, down 0.3% (seasonally adjusted) from November 2022".

3. Empire State. New York manufacturing experienced the fifth worst contraction ever, collapsing to -32.9 in January from -11.2.

4. Excess savings. "Our outlook still includes a mild recession, but we now expect it to start later & come with lower peak unemployment (5.1%) .. given durability in consumer spending .. strong labor markets, excess saving, declining energy prices, and easier financial conditions".

5. Loosening conditions. "Financial conditions have loosened MTD at fastest rate since November 2022 and before that, fastest since November 2020'.

6. Peak fear. "Recession fears have peaked".

7. Inflation & rates expectations. "No one expects short-term rates to be higher a year from now & everyone expects inflation to be lower".

8. Tail risks. "Inflation staying high still the number one tail risk".

9. Dollar shorts. "The dollar short is a consensus view these days, but positioning is also becoming rather extreme. Time for a pause at least?"

10. Global vs. US stocks. "Global stocks are having their best start to the year in at least 30 years (and one of their best years relative to US stocks so far)".

11. Underweight US stocks. "China & Fed optimism = cash level drops to 5.3%; rotation to EM, EU, cyclicals from pharma, tech, US stocks but no 'up-in-equity' positioning… Q1 risk asset 'pain trade' remains up".

12. Bonds > stocks. “Fund managers expect bonds to beat stocks”.

13. Stocks vs. bonds. "Historically, equities and bonds become less correlated when the economic cycle slows".

14. Shifting narrative. "Reactions to earnings are getting bigger, while reactions to inflation prints and FOMC meetings are getting smaller".

15. Sentiment improves. "Overall sentiment is now more bullish (less bearish) than one month ago and even more so compared to 3 months ago".

16. Sentiment indicator. Stock positioning has returned to 'extremely light' levels".

17. Retail army. "Single-stock selling by ‘Retail’ has paused in the past week as net flows bounce from lows".

18. Household allocations. "Household allocations to equity remain elevated".

19. Investor flows. "Despite stocks moving higher of late, investors have not piled into risk; majority of inflows over past few weeks concentrated in aggregate bond funds and international markets (government bond funds a close third) ".

20. US equity allocation. "Global investors dumping US equities".

21. Most shorted. "Stocks that are heavily shorted (basket tracked by Goldman Sachs) surged 15.7% last week, most for a week since April 2020".

22. Expensive bull market. "Welcome to the most expensive ‘new bull market’ we've ever seen. The current Shiller PE ratio is 29.24. The mean is 17 and median 15.91. Most bottoms start in the teens or lower…".

23. Great breadth. "Total 10-day NYSE advancers to decliners was >2.1 recently. Very rare to see this much market breadth. 6 mos later? S&P 500 never lower and up nearly 16% on average".

24. Market bottoms. "SPX tends to bottom 3-6 months before downward earnings revisions cycles are done. ... In this context ... the earnings headwind for the S&P 500 can be mostly resolved in the coming months, setting the stage for a recovery ... a lot is baked in already".

25. Fair value. "Valuations much above current levels are unsustainable unless there is a significant change in the macro backdrop. For now, we suspect valuation could put a near-term cap on upside momentum ... We are comfortable with a 3700-4000 $SPX trading range call for now".

26. Price targets. "FMS investors expect the S&P500 to end 2023 at 3892".

27. Profit margins. "US net profit margins are collapsing after the surge of stimulus driven demand and a shuttered economy. Those margins can't get repeated in a normal economic (slow-growth) environment".

28. Earnings revisions. "Corporate earnings revisions have turned positive as reopening takes hold".

29. EPS progression. "Profit expectations now stand as arguably the single biggest contrary indicator to the burgeoning optimism. Estimates are moving down at a rate that in recent history has always presaged a recession".

30. Earnings headwinds. And finally, it's a small sample size (20 companies), but here are the negative factors being cited on Q4 earnings calls.

Thanks for reading!

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MONDAY BONUS: Cheat sheet. Global markets week in review.