Daily Chartbook #28

Welcome back to Daily Chartbook: market charts, data, research, and insights pulled from various sources around the Internet by a solo retail investor.

1. Clues from housing (I). On Tuesday, we noted months of supply had increased sharply. From Bilello: "The supply of new homes in the US crossed above 10 months in July, its highest level since January 2009. Every time it's been over 10 months in the past the US has been in a recession."

2. Clues from housing (II). The housing market—which is typically a 6-12 month leading indicator for economic and market cycles—is signaling "unemployment rate will likely be above 6% in 2023".

3. Affordability (or lack thereof). From CBNC: housing affordability is "at its lowest level in 30 years. It requires 32.7% of the median household income to purchase the average home using a 20% down payment on a 30-year mortgage".

4. Fighting the Fed. Financial conditions have eased since June despite the Fed's aggressive rate hikes.

5. Chicago Fed NFCI. The National Financial Conditions Index is in line with 2001 recession levels but below the extreme levels of the 2 most recent recessions.

6. Supply chains. An updated look at shipping rates from Lukas Kuemmerle (Commodity Report): "There seems to be a clear divergence between the cost of charting containers (HARPEX) and spot freight rates for major routes. (Drewry)".

7. Real capital goods orders. After adjusting for inflation, yesterday's report on durable goods orders doesn’t look so strong.

8. Inflation drivers. A New York Fed “analysis shows that supply chain constraints were not the primary cause of higher inflation from 2019 – 2021. Aggregate demand was the key driver, as it still is now.”

9. Sticky inflation? From Goldman (Pasquarillo): “I understand that the trajectory of headline inflation has inflected lower, and there’s grounds for optimism .. that said, .. the underbelly of US inflation .. awfully concerning and [doesn’t] suggest the pressure will magically disappear anytime soon.”

10. CPI nowcast. Cleveland Fed's CPI nowcast is inflation at 0.9% MoM for the current period, the lowest since May 2021.

11. Jobless claims. "Initial jobless claims declined by 2,000 to 243,000. The 4 week average, however, increased by 1,500 to 247,000.  Continuing claims declined -19,000 from their 4 month high water mark one week ago to 1,415,000".

12. Consumer expectations. According to a BofA survey, “66% of respondents expected inflation to remain elevated with recession or slower growth”.

13. Already in a recession? Among income groups, those earning $125,000-250,000 are the most pessimistic.

14. Squeezed. Meanwhile, it’s the bottom tier of earners predictably feeling the most pain from higher prices.

15. Corporate profits (I). "US corporate profits rise to 12.25% of GDP in Q2, close to their highest level since the 1950s".

16. Corporate profits (II). They also topped "$2 trillion in Q2 for the first time ever".

17. Corporate profits (III). Nonfinancial corporate profits improved by 6.2% to 15.5%, the highest since 1950.

18. GDP vs. GDI (I). "The divergence between GDP and GDI is remarkable. In theory, the two should be identical -- they measure the same thing from opposite sides of the ledger."

19. GDP vs. GDI (II). Another look at the divergence between the two measures.

20. World GDP. "After growing at annual rates of 6.2% quarter on quarter in the fourth quarter of 2021 and 2.6% in the first quarter of 2022, world real GDP fell at a 1.8% rate in the second quarter".

21. Q2 GDP revisions (I). "GDP growth for 2Q22 revised up from first print of -0.9% to -0.6% (q/q annualized) … consumption revised from +1% to +1.5%".

22. Q2 GDP revisions (II). Contributions breakdown.

23. Q2 GDP revisions (III). Further breakdown of contributions.

24. Q2 GDP revisions (IV). The evolution of GDP drivers (table shows quarter-over-quarter change).

25. Kansas Fed PMI. "The latest Kansas Fed Manufacturing Survey data showed an expansionary reading of 3,  disappointing consensus expectations of 10."

26. S&P days without new ATH. "Here is the number of consecutive days without reaching a new all-time high in the S&P 500."

27. NAAIM. The National Association of Active Investment Managers Exposure Index is down to 54.86 from 71.59 two weeks ago.

28. Powell speaks tomorrow. And finally, the market is placing a 60% chance on a 75bps hike in September ahead of Powell’s speech at 10 am tomorrow.