Daily Chartbook #239

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

1. Homebuilder confidence. "Builder confidence in the market for newly built single-family homes in July posted a one-point gain to 56...This is the seventh straight month that builder confidence has increased and marks the highest level since June of last year."

2. CRE prices. CRE property prices are currently down 12.1% in the 10 months since their peak. Morgan Stanley expects a peak-to-trough (18-24 months) decline of 27.4% in prices.

3. Supply chain. Goldman Sachs' Weekly Bottleneck Index increased sharply due to congestion along East Coast ports.

4. Global economic outcome. 68% of participants (FMS investors) in BofA's Global Fund Managers Survey expect a soft landing.

5. Recession predictions. "48% of FMS investors predict start of global recession by the end of Q1’24 (25% say Q4'23, 23% say Q1'24)."

6. Twin deficits. "The US is now running twin deficits that are as severe as those experienced during the worst parts of the Global Financial Crisis...This further emphasizes the importance of owning hard assets in this environment."

7. CPI Nowcast. "The Cleveland Fed Inflation Nowcast MoM is currently at 0.34%. If correct, US CPI would re-accelerate to 3.3% YoY."

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8. Retail sales (I). Retail sales rose by less than expected in June, increasing 0.2% (vs. +0.5% est). Core retail sales jumped by 0.6%. On an annual basis, retail sales increased by 1.5% (vs. 1.6% est).

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9. Retail sales (II). Adjusted for inflation, real retail sales have declined on an annual basis in 7 out of the last 8 months including the last 5 straight.

10. Industrial production. "The June index of production at factories, mines and utilities decreased 0.5% for a second month...Manufacturing output declined 0.3% in June, the most in three months...Output of consumer goods dropped 1.3% last month, the most since February 2021."

11. Downgrades > upgrades. "June was the 7th time in 9 months HY issuer downgrades (19) surpassed upgrades (14) and the LTM upgrade-to-downgrade ratio fell to 0.9:1, lowest since March 2021."

12. Treasury General Account refill. "This chart from Citi shows how the TGA was topped back up after its four previous major drawdowns. This one is keeping pace with the fastest of them."

13. Digital asset flows. "Digital asset investment products saw US$137m of inflows last week...inflows for the last 4 weeks now total US$742m, representing the largest run of inflows since the final quarter of 2021."

14. FMS vs. commodities. "FMS investor capitulation in commodities. Biggest UW since May '20 and largest 3-month rotation away from commodities since May '13."

15. FMS vs. bonds. "Seven of the last eight months have seen overweight bond allocation, after a 14-year streak of underweight allocation. That said, the bond allocation has declined by 11 ppt over the last 2 months."

16. FMS sentiment. "Broad measure of FMS sentiment, based on cash positions, equity allocation, and economic growth expectations...[is] still stubbornly low."

17. Institutional vs. retail. There's a very wide gap between institutional and retail investor sentiment.

18. FMS vs. US equities. "Allocation to US equities surged 15ppt MoM to net 10% underweight, the highest allocation this year. US equity allocation has spiked 29ppt since May, the largest 2-month increase since Apr '22."

19. HFs vs. global equities. "Hedge fund positioning has grown more cautious over the last month. Global Macro HFs have cut the long equities exposure they had accumulated early in the year."

20. MFs vs. US equities. "US Equity MFs have continued to chase equities higher, mostly driven by low beta MFs that were behind the curve...while MFs are still keeping cash at hand...their long equity futures positions have also increased to near 2021 levels."

21. CTAs vs. global equities. CTA global equity allocations remain high (~0.5 stdev above the historical average) and are in the 54th percentile.

22. CTAs vs. SPX. "CTAs have much more to sell in a down-market versus what they have to buy in an up-market (i.e. positioning is asymmetrically exposed to the downside)."

23. Most crowded. FMS investors still see long Big Tech as the most crowded trade.

24. Tech flows. "Both and have seen close to 4yr record inflows over the past two weeks ($4.8bn and $0.5bn, equivalent of 2.3% and 1.1% of AUM, respectively)."

25. Long/short flows. The S&P 500 saw strong inflows last week while the Nasdaq-100 saw a mix of new longs and new shorts.

26. Investor flows. "Investors keep piling into risk-on ETFs, with largest inflows going to large-cap equities, global equities, and high yield corporate bonds ... market cap still a big influence given large-/mid-cap ETFs have taken in slightly >50% of monthly inflows."

27. July rotation. "In July, FMS investors rotated into US, insurance, staples, EM, equities, and out of healthcare, Japan, bonds, tech."

28. Most OW/UW. "Relative to the past 20 years, investors are long bonds, staples, EUR, and cash...and underweight equities, US$, REITs, energy, and tech."

29. Absolute positioning. In terms of absolute positioning, FMS investors are most bullish cash, EM, healthcare, alternatives, and staples. They are most bearish equities, UK, utilities, real estate, and US.

30. Profit expectations. And finally, with “only” 50% of participants expecting the profit outlook to worsen, global profit expectations among FMS investors are the least pessimistic since February 2022.

Thanks for reading!