Daily Chartbook #278

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1. Asking rent. "The median U.S. asking rent in August was $2,052, just $2 below (-0.1%) the record high set a year earlier. That’s up just slightly (0.7%) from a month earlier."

2. Commercial real estate. "We expect CRE prices to be down -27.4% from peak to trough in 18-24 months this cycle (vs -34.9% during the GFC in 34 months) ranging from -15% for apartments to -40% for office."

3. Small business outlook (I). The Optimism Index “decreased 0.6 of a point in August to 91.3, the 20th consecutive month below the 49-year average of 98.”

4. Small business outlook (II). "Net percent reporting 'credit was harder to get' fell to 4, the lowest since June 2022. Net percent expecting credit conditions to ease improved to -6, where it was in February, the month before SVB."

5. Small business outlook (III). "Quality of labor remained single largest problem for small businesses per [NFIB]…inflation climbed as an issue but remains in second place for now."

6. Wage growth. "US posted wages grew 4.5% year-over-year in August 2023...At its current rate of slowing, posted wage growth would return to its 2019 average of 3.1% late this year or early in 2024."

7. Household income. The median real household income fell by 2.3% to $74,580 in 2022, the largest drop in since 2010.

8. FMS inflation expectations. "Expectations for a rise in inflation are the highest since May’22, with the biggest monthly increase since Mar’22."

9. Online prices. "Online prices fell 3.2% year-over-year in August 2023, while rising 0.4% month-over-month."

10. Recession expectations. "Nearly 30% of FMS investors think there will be no recession at all in the next 18 months."

11. Fed outlook. "Fund managers increasingly believe that the Fed has finished raising rates."

12. First cut. "Most FMS investors expect the 1st Fed rate cut to occur between Apr-Dec 2024."

13. FMS China outlook. "0% expect stronger China growth."

14. USD dominance. The USD's share of SWIFT payments is at its highest (46%) in a decade.

15. Oil supply. "Global oil markets face a supply shortfall of more than 3 million barrels a day next quarter — potentially the biggest deficit in more than a decade — as Saudi Arabia extends its production cuts."

16. Record inversion. "Today we just broke the record (since at least 1962) for the longest streak of trading days with an inverted yield curve using the 10-Year Treasury Note and the 3-Month Treasury Bill."

17. Exposure plans. Among JPMorgan clients, "41% plan to increase equity exposure, and 64% to increase bond duration near term."

18. Blackout period. "GS estimates that approximately 50% of SPX companies will be in the buyback blackout period soon, 9/15."

19. Household allocations. "US households are still heavily invested in equities."

20. Institutional vs. retail allocations. “Institutions are now increasing their equity allocation, catching up with the resilient belief from the retail cohort. Structurally, this isn't bearish.”

See:

21. FMS rotation. "In September, FMS investors rotated into US, industrials, REITs, stocks...and out of EM, telecoms & tech, bonds, UK."

22. FMS positioning. FMS investors are bullish healthcare, cash, staples, technology; bearish UK equities, utilities, real estate, Eurozone equities.

23. US vs. EU rotation. "September saw a record jump in FMS investors’ allocation with a shift into US equities and out of EM equities."

24. FMS vs. Real Estate. "Real Estate most hated since the GFC."

25. HFs vs. Discretionary vs. Staples. "Hedge funds are positioned more cautiously on the durability of US consumer spending trends, having moved into Consumer Staples while net sold Consumer Discretionary in the past month."

26. HFs vs. Specialty Retail. "Managers appear to be especially guarded on Specialty Retail stocks: aggregate long/short ratio across the group now stands at ~1.13, down sharply from ~1.35 in July and at one-year lows."

27. Small caps vs. large caps. "US small caps have hit a 22-year low relative to large caps."

28. Small caps vs. SPX. "History suggests small caps may do slightly better than large caps over the next 100 days, but the differential will likely be relatively small."

29. Tech vs. SPX. "Tech has been unusually strong this year relative to the S&P 500."

30. Sector correlations. And finally, when S&P 500 sector correlations "reach and hold 0.90 for more than a few weeks (as in Q4 2018, 2020 and 2022), you know we are in a bear market. If they run consistently below 0.83 (the long run average), a bull market is underway."

Thanks for reading!