Daily Chartbook #227

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

1. Mortgage demand. Mortgage applications are still historically low but increased for the 3rd consecutive week despite rising mortgage rates.

2. Freight rates. "White line is China to West Coast Container rates ($1,192 USD) vs. China to East Coast (red line) down to $2,225 USD per container. Both of these trade lanes are approaching their April lows."

3. Balance of trade. "May goods deficit at $91.1 billion vs. $93.7 billion est. & $96.8 billion in prior month … exports -0.6% m/m; imports -2.7%."

4. Inventories. "May wholesale inventories (blue) -0.1% m/m vs. -0.1% est. & -0.3% prior … retail inventories (orange) +0.8% m/m vs. +0.2% est. & +0.3% prior."

5. Financial conditions. "The National Financial Conditions Index (NFCI) ticked down to –0.32 in the week ending June 23, suggesting financial conditions continued to loosen."

6. Surprise. "The US economic surprise index had the biggest one-day move higher since February 2023."

7. Bankruptcy filings. "Weekly data for corporate bankruptcy filings has started to meaningfully deteriorate in recent weeks...The faster speed of slowing in the weekly data is not consistent with the gradual rise in the monthly default rates seen in HY, IG, and loans."

8. Q2 GDP divergence. "The St. Louis Nowcast sees real GDP growth slowing and turning negative in Q2 while the Atlanta Fed GDPNow has it positive and accelerating."

9. US commercial petroleum inventories. "Inventories fell by 5.3 MMbbl last week driven by a **9.6 MMbbl** draw in crude oil inventories, the second largest crude draw thus far in 2023."

See:

10. Uninversion. "Our work indicates that recessions begin when the curve un-inverts...Treasury futures imply that the curve will first un-invert in June 2026."

11. VIX vs. Fed funds. "The current low volatility regime may be temporary due to the lagged relationship to the Feds rate tightening cycle."

12. VIX vs. MOVE. "VIX remains low compared to the Treasury market implied vol (MOVE)."

13. VIX vs. SPX. "Low volatility markets seldom see annual losses, and their average total returns are much better than high volatility years."

14. Risk sentiment. "Oxford Economics’ risk sentiment indicator — a composite of 10 individual measures — has spiked to its highest level since the second half of 2021, before the peak in US equities."

15. Investor Intelligence sentiment. "II bears have dropped to their lowest level since Aug 2021. Bulls and bull-bear spread, which are elevated but not excessive, show healthy levels of optimism."

See:

16. Retail sentiment. "Retail sentiment indicators from brokerages are back at long-term levels."

17. Mutual fund flows. "Over the last month mutual funds resumed buying equities for the first time since February. Equity flows, mainly tiled to the US, clocked the highest levels since Nov'22"

18. Staples insiders. "Consumer Staples sector insiders (ticker XLP) have been buying. Insiders – often early, seldom wrong."

19. Unwinding shorts. "Net Spec positioning [in the S&P 500], which was very short, has picked up over the last month, indicating shorts being unwound."

20. Bank positioning. "Aggregate US Banks long/short ratio now stands at 1.10 (vs. 1.52 at the start of 2023), the lowest level in more than five years."

21. SPX correlation. "SPX 6m implied correlation is near the lowest levels on record, which argues it’s a good time for individual stock pickers."

22. Nasdaq performance. "Through the 4th to last trading day of the first half, the Nasdaq is on pace for its 3rd best first half on record.  Last year was the second worst at this point."

23. Russell 2000 debt. "30% of Russell 2000 debt is based on floating interest rates."

24. Russell 2000 returns. "The Russell 2000 should rise by 14% during the next 12 months, according to a simple model based on US economic growth and starting valuations that has explained roughly two-thirds of Russell 2000 returns between 1995 and 2015."

25. Russell 2000 vs. SPX vol. "Russell 2000 and S&P 500 realized volatility have diverged recently."

26. EPS expectations. "Earnings expectations are no longer declining, which is giving some fundamental justification for the recent uptick in equity flows."

27. AI vs. EPS. “GS model suggests AI will lift 20-year CAGR in S&P 500 EPS by 50 bp to 5.4%.”

28. Earnings trough. "Consensus expects year/year EPS growth will trough at -8% in 2Q 2023."

29. P/E by quartile. "While the top quartile is indeed expensive, trading at 33x forward earnings, the second quartile is expensive too, trading at 21x. The bottom quartiles are outright cheap, trading at 14x and 9x, which is consistent with history."

30. Global breadth. And finally, “market breadth last month went up a little but the magnitude was negligible, with the share of stocks outperforming the index globally remaining at depressed levels.”

Thanks for reading!