Daily Chartbook #293

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

1. Logistics Managers Index. The LMI expanded at the fastest rate (+1.2 to 52.4) since February but remains well below its all-time average (62.9).

2. Economic Optimism Index. The index cratered in October to 36.3 from 43.2 for the 26th consecutive monthly reading in pessimistic territory. The 6-month outlook (not shown) fell to its lowest ever.

3. Financial conditions. "The nominal GS US Financial Conditions Index tightened by 18.6bp to 100.30 over the last week, due to a higher 10-year Treasury yield, lower equity prices, a stronger dollar, and higher BBB credit spreads."

4. Corporate spreads. "Despite the 7% correction in equities, credit spreads are little changed over the past two months."

5. Bank loan growth. "For nearly every major category, bank loan growth has been softer since the failure of Silicon Valley Bank than it has been on a year-over-year (y/y) basis."

6. Federal interest expense vs. GDP. "We project federal interest expense will rise from 2% of GDP in 2022 to 3% in 2024 and 4% by 2030, surpassing the early 1990s peak by 2025."

7. JOLTS (I). The number of job openings surged unexpectedly from 8.92 million to 9.61 million in August. Consensus was for a modest decline.

8. JOLTS (II). "Quitting held steady at 2.3%, its pre-pandemic average. If this key indicator can continue to stay resilient, wage growth will continue to slow but settle in at a still-rapid pace."

9. USD drivers. Recent strength in the USD has been largely driven by rising real rates.

10. Strategic Petroleum Reserves. The US has 17 days of supply left in SPR.

See:

11. Commodity flows. "Global commodities markets experience largest weekly outflows of 2023 as US yields continue to push higher...[but] inflows remain record strong...YTD at ~$217 billion."

12. TIPS vs. gold. The rise in real yields suggests further downside for gold.

13. China vs. UST. "Maybe China is behind the rise in US long rates…China has fewer dollars to recycle into Treasuries. In fact, China has been selling $300 billion in Treasuries since 2021, and the pace of Chinese selling has been faster in recent months."

14. Retail vs. UST ETFs. "Retail investors continue to buy Treasury ETFs."

15. Bonds vs. Fed. "Until this cycle, Treasury bonds had rallied at every Fed pause. Assuming July was the last hike (which I believe), bonds are not behaving anything like they have in previous cycles."

16. Exposure plans. Among JPMorgan clients, "36% plan to increase equity exposure and 88% to increase bond duration."

17. Sentiment indicators. Risk sentiment across indicators.

18. Investor flows. "Large- and mid-cap ETFs continue to command majority of inflows over past month; interest in/inflows into small caps returned last week; and on one-month basis, government bond ETFs represent nearly 17% of inflows (up from 13% in prior week)."

19. Equity client flows. "9th week of equity inflows led by Industrials."

20. HF trading flow. "Hedge funds net sold Consumer Discretionary stocks [in September] at the fastest pace since Mar ‘22."

21. CTA unwind. "The pace of CTA unwinds in ES1 futures (magnitude + speed) have been the largest on record ... almost $40bn of spx was sold over the last 5 sessions."

22. Equity futures positioning. "Equities remain vulnerable from a positioning point of view."

23. Buybacks. "Corporates return from the blackout window on October 23rd. Corporates become very busy at the end of the year, and November/December are the best two months of the year."

24. SPX vs. Utilities. "Ratio of S&P 500 Utilities sector relative to broader index has fallen to new all-time low."

25. Mag-7 vs. small-caps. Long Mag-7/short small-caps has been a great trade YTD.

26. Mega-cap vs. remaining 493. "The largest stocks now trade just 14% above their median P/E multiple since 2014 (24x)."

27. Sector correlations. Sector "correlations right now (0.82) are right on the long run average (0.82) and tightened up considerably after the July 31st highs for the S&P 500 and lows for correlations (0.61). This tells us the selloff is not over yet."

28. Sector capitalization vs. net income. "Sector capitalization of the S&P 500 has shifted significantly over time...but has not always correlated with the proportionate contribution to net income."

29. EPS estimates. “Roundtrip complete: blended forward 12m EPS estimates for S&P 500 have come back to their peak reached in mid-2022.”

30. Equal-weight vs. real yields. And finally, “even US equal-weighted P/E, which is trading cheaper than the weighted P/E, has opened a gap with real yields.”

Thanks for reading!