Daily Chartbook #232

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

1. Lending vs. GDP. Jefferies' combined indicator of US loan demand & lending standards "declined to a negative 101.6% in the April survey, the lowest level since January 2009, while US real GDP still rose by 1.8% YoY in 1Q23."

2. Q2 GDP. The Atlanta Fed's GDPNow model estimate for Q2 GDP growth increased to 2.1% from 1.9% on July 3.

3. Excess savings. "Different measures of excess savings paint a substantially different picture of how close we are to excess savings running out."

4. Non-farm payrolls (I). The US added 209k jobs in June (vs. 225k est, 306k prev), the fewest since December 2020.

5. Non-farm payrolls (II). This marks the first NFP miss in 15 months.

6. Non-farm payrolls (III). "Payrolls for every month in 2023 have been revised lower."

7. Unemployment rate. "The US Unemployment Rate moved down to 3.6% in June from 3.7% in May. The 3.4% reading in April was a 54-year low."

8. Labor force participation. Despite a participation rate (62.6%) that remains below pre-pandemic levels, prime-age participation is at its highest (83.5%) since May 2002.

9. Employment recovery. "Basically every industry has seen employment completely recover or exceed pre-pandemic levels now—the two exceptions are leisure and hospitality (which includes restaurants) and government (which includes public schools), which remain below pre-pandemic levels."

See:

10. Avg. hourly earnings. Average hourly earnings were up 0.4% in June (vs. 0.3% est, 0.4% prev). On an annual basis, earnings increased 4.4% (vs. 4.2% est, 4.4% prev).

11. TIPS vs. CPI. "TIPS break-evens continue to suggest that inflation is quickly returning to normal. By this standard, the Fed's current position on rates is quite restrictive."

12. Bond flows. US bonds saw their 27th consecutive week of positive flows this week totaling $7.8 billion.

13. AAII allocations. "According to ⁦AAII Sentiment⁩, June stock allocation rose to 66%, a 13m high … bond allocation fell below its 15.9% historical average for 28th consecutive month."

14. Large-cap flows. Large-cap funds saw their largest inflow in nearly 8 months.

15. Retail buying. "Retail investors have been aggressively buying stocks and ETFs."

16. Private client flows. BofA clients have been buying Japan and selling TIPS.

17. European equities. "European Equities saw largest monthly net buying in 4 years as the region is now at the most over-weight level on our records."

18. Cyclicals vs. inflation. "Cyclicals [have] de-coupled from market implied inflation."

19. EPS vs. CPI. Adjusted for inflation, real EPS growth since January 2022 is just 3-4% (vs. 12.5%).

20. EPS vs. GDP forecasts. "Q3 and Q4 earnings estimates are inconsistent with US GDP forecasts."

21. Q2 EPS guidance. "The second quarter has seen the highest number of S&P 500 companies issuing positive EPS guidance for a quarter since Q3 2021."

22. EPS vs. SPX. "This equity market rally is not just about technicals. It is being driven by a very real upgrading of analysts’ EPS forecasts. The market is skipping higher, hand-in-hand with earnings upgrades."

23. Tech EPS. "The US tech sector has surged on the back of what may prove to be nothing but hope–mainly AI related. Actual earnings are poor in absolute and relative terms."

24. Semis earnings vs. multiples. "Semiconductor earnings have been significantly revised down, while multiples have soared off the bottom."

25. SPX valuation. "While valuations appear extended versus history, they appear quite reasonable relative to their cost of capital."

26. Sector valuations. Most sectors are cheap on a relative P/E basis vs. the S&P 500.

27. Sector composition. Tech accounts for 28% of the S&P 500's market cap today. It was 33% during the Tech Bubble.

28. Net income contributions. Tech and Financials account for 18% of S&P 500 net income each.

29. Bottom-up price target. And finally, “industry analysts in aggregate predict the S&P 500 will see a price increase of 9.3% over the next 12 months,” implying a price target of 4,823.78.

Have a great weekend!