Daily Chartbook #279

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1. Mortgage demand. The MBA Mortgage Market Index dropped to its lowest since 1996.

2. Home prices. "Median U.S. home prices are now a mere 5% away from 1970 and 2008 figures, two years linked with recessions. As prices drop, more homeowners may sell to retain some equity, potentially resulting in a cascade effect of price normalization."

3. National Financial Conditions Index. The NFCI "ticked down to –0.38 in the week ending September 8, suggesting financial conditions loosened again."

4. GDP growth. Goldman sees a meaningful slowdown in GDP growth between Q3-Q4 due to student loans, shutdowns, and strikes.

5. Student loans vs. retail stock flows. Unsurprisingly, higher student loan payments means smaller retail flows to stocks.

6. United Auto Workers vs. auto production. "Almost half of domestic auto production comes from companies that could be impacted by a UAW strike."

7. Bank lending. "Bank lending has inflected upwards, despite high rates and everyone's expectations for a collapse."

See:

8. Inflation (I). Headline and core CPI rose by 0.6% (in line, 0.2% prev) and 0.3% (vs. 0.2% est, 0.2% prev) MoM in August, respectively. Supercore inflation increased by 0.37% MoM (0.19% prev).

9. Inflation (II). On an annual basis, headline and core CPI rose by 3.7% (vs. 3.6% est, 3.2% prev) and 4.3% (in line, 4.7% prev). Supercore inflation increased by 4.02% YoY (4.13% prev).

10. Inflation (III). "The costs of vehicle maintenance and repair is up 29.5% since February 2020. And it continues to rise at a rapid clip, up 1.1% in the last month alone and up 12.0% YoY (not shown). This is now the hottest single sector for inflation."

11. Alt inflation. WisdomTree's alternative measure of inflation has headline and core inflation at 1.45% and 1.7%, respectively.

12. Base effects. “Remember, because of base effects, YoY CPI is likely to trend sideways between 3.5-4.5% for the rest of the year regardless of what happens to MoM.  At some point we'll need to see sustained 0.0-0.2% MoM prints to get back down to 2% of course.”

13. US petroleum inventories. "US commercial petroleum inventories rose 10.4 MMbbl last week...Biggest weekly total liquids build in 10 weeks; products more concerning than crude, imho."

See:

14. Oil volatility. "The steady move lower in crude oil implied volatility shows there is an air of certainty around the rally in oil prices (which at some point might become complacency)."

See: ,

15. CTAs vs. oil. CTAs are very long crude oil.

16. Reflexive USD strength. "During USD bull periods, dollar strength begets dollar strength: as the US is economically outperforming, the Fed hikes and foreign capital moves to the US."

17. Treasury futures positions. The divergence in positioning between asset managers and hedge funds is getting more extreme.

18. Tail events vs. volatility. "The number of tail events across assets has declined sharply and reached one of the lowest levels since the 1990s during the summer. This led to a material reset lower for implied vol across assets."

19. Risk appetite. "The risk appetite of US equity investors cools this month as the risk of a US recession diminishes."

20. Money market fund flows. "Global Money Market Funds have seen +$1.0 Trillion worth of YTD inflows. This is the second largest year of inflows on record, only Covid times saw larger inflows (~$1.118 Trillion)."

21. Investor flows. "Large-cap equities popular again given second consecutive week of major inflows ... on 1-month basis, large & mid-cap ETFs hold top spot for inflows at 32.4%; cyclical sectors and small caps have seen largest outflows; bonds have seen inflows."

22. Fed liquidity vs. SPX. "Despite QT of almost 1T$, Fed net liquidity actually increased fueling the rally in big tech."

23. Equity risk premium. "ERP is at 4%ile relative to post-GFC history (2010) and at 33%ile since 2000 suggesting an expensive market."

24. Valuation vs. business cycle. "The spread between earnings yield and bond yield (i.e. Fed Model) is historically negatively correlated with the business cycle."

25. Valuation vs. earnings. "If earnings are bottoming out, per estimates, it is perfectly rational for the valuation side of the market to lead the way. But that valuation phase is now behind us, which means that actual earnings growth will need to carry the market forward."

26. EPS growth (I). "Cyclical data suggest EPS Growth should pick up over the next two quarters."

27. EPS growth (II). "Consensus expects year/year EPS growth troughed in 2Q and will be +9% by 4Q."

28. Profit margins. "We expect S&P 500 net profit margin to contract to 11.3% in 2023."

29. Growth vs. Value. "The last time Value was so oversold relative to growth was in Q4 2021...and Value handily beat Growth over the next 4 months."

30. Top heavy. And finally, the “top 7 stocks have rallied +66% while remaining 493 have returned 5%.”

Thanks for reading!