Daily Chartbook #221

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

1. NAHB (I). "The US Housing Market Index rose for the 6th consecutive month, moving above 50 for the first time since last July. Homebuilder confidence increasing due to extremely low levels of existing inventory (new homes representing a larger share of overall supply)."

2. NAHB (II). "The swiftness of the rebound in Homebuilder sentiment over the last six months has only been eclipsed by the period coming out of COVID."

3. Housing starts & building permits. Housing starts surged by 21.7% in May [largest monthly increase since October 2016] while building permits jumped 5.2% after back-to-back months of declines.

4. Units under construction. "There are 1.689 million units under construction, just 21 thousand below the all-time record of 1.710 million set in October 2022."

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5. Philly services. The "activity index was uniformly weak with most sub-index values dropping into negative territory.  The headline dropped -0.6 to -16.6 with weakness across the board including prices paid (-19.5) and received (-27.4)."

6. Supply chain vs. inventory. "With supply chains catching up to softening demand, we think it's likely that bloated inventories across the economy will now lead to the order cancellations and price discounting that change the trajectory of revenue growth expectations provided by company guidance."

7. Excess savings. "Excess savings in state and local governments is still elevated and personal excess savings have not yet been fully drawn down."

8. Wage growth. "While wage growth has trended down more slowly this year than in 2022, it has now returned more than halfway to the 3½% level we think is consistent with 2% inflation, and employer surveys suggest that wage growth is already on track to get the rest of the way there by around the end of the year."

9. Credit growth. "Last week saw the weakest weekly growth in credit in the US since SVB assets were taken out of the calculation."

10. Q2 GDP. The GDPNow model estimate for Q2 GDP growth increased to 1.9% from 1.8% on June 15.

11. No liquidity drain. Debt issuance following the debt ceiling deal has not resulted in a drain on reserves/liquidity.

12. No liquidity drain, yet. "We have been highlighting the risk to markets from the $1.2T in Treasury issuance we expect over the next 6 months. This should begin to hit asset prices by the end of this month and carry into the fall."

13. Expected yields. "For the first time ever the yield on cash, bonds and equities is the same. If you are a US investor you should probably buy bonds because in risk-adjusted terms they give you more."

14. Stock vs bond ETF flows. YTD flows into equity ETFs ($102 billion) have now surpassed those into fixed-income ETFs ($93 billion).

15. Leveraged ETF trading. "The chart below shows the extent of bullish vs bearish speculation via leveraged US equity ETFs. We can see clearly that after the collapse and hibernation of 2022, bullish speculation has suddenly reemerged."

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16. Total Market ETF flows. "Interest in equities is still running well below that of last year."

17. Cumulative equity flows. "After a period of inflows lasting two years, equity flows have moderated."

18. Risk appetite. Goldman’s Risk Appetite Indicator has climbed above 0.8 and risk-on sentiment is rising across indicators.

19. Equity positioning. "Deutsche Bank’s positioning indicator moved deeper into overweight territory, with both systematic and discretionary strategies rising."

20. Systematic positioning. Systematic strategies positioning and CTA exposure to equities are in their 71st and 77th percentile, respectively. 

21. Vol control funds. Equity allocation is in the 60th percentile and funds are increasingly sensitive to a 2% sell-off.

22. Stretched positioning. "Our US Equity Sentiment Indicator 'is in stretched territory for the first time since April 2021'."

23. Hedge fund positioning. Hedge funds have "significantly reduced duration positioning across funds relative to normal.  While not as extreme as last year, this suggests these funds are expecting higher rates for longer ahead."

24. Financial insiders. "Financial sector insiders continue to INCREASE their pace of buying...Red dots = Indicator crosses above 58 first time in 6 months."

25. Retail call options. "Call volume activity hit fresh record highs in the $SPX and $IWM last week...Specific to retail, small traders’ call option flows (<10 contracts) saw a sharp rebound during May and June."

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26. Options skew. "Skew—an options-based measure of pessimism vs. optimism—is at its most bullish levels since at least 2019."

27. World breadth. No ACWI markets made new 52-week lows last week while 4 DMs and 6 EMs made new 52-week highs, respectively. "All together, net new 52-week highs last week were as high as they have been since November 2021."

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28. US breadth. "In the US, the percentage of industry groups making new 52-week highs reached a new cycle high."

29. SPX breadth. "Thru last week’s close, 11% of members in S&P 500 made a new 52-week high … largest share since April 2022."

30. Major index drawdowns. And finally, “some stuff is closer to the all time highs, than to recent lows.”

Thanks for reading!