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Daily Chartbook #306
Catch up on the day in 30 charts
Welcome back to Daily Chartbook: the day’s best charts & insights, curated.
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1. PBOC cash infusion. "The People’s Bank of China handed lenders a record sum of cash via a short-term liquidity tool on Friday, as an indicator for funding costs surged to the highest since April."
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2. WACC. "Cost of Capital for the median company in our coverage has risen to 9.6% currently vs. 8.5% on average during 2022."
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3. Debt burdens. "Russell 2000 companies carry about four times the amount of debt relative to their earnings, compared to 1.4 times for S&P 500 companies."
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4. Economists' optimism. "Economists raised their US growth projections through early 2024 and trimmed recession odds to a one-year low."
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5. Inflation expectations. "It looks as though the market’s confidence that inflation has been beaten might be beginning to shake."
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6. Taylor rule. "Taylor rule now says Fed should be done. That is, as long as consensus is right that inflation slows and unemployment rises."
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7. Yield curve. "The curve is now closer to disinverting...than it has been in more than a year. That means traders are more confident that there are no hikes in the near future, but also much less confident about more cuts in the longer term."
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8. UST flows. "36th straight week of inflows ($5.3bn), longest streak since Aug’10."
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9. MMF outflows. "Cash: largest weekly outflow ($108.9bn) ever."
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10. Risk appetite. "The risk appetite indicator currently stands at a neutral level, implying that market participants are neither excessively risk-seeking nor risk-averse."
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11. Bull & Bear Indicator. BofA's indicator is "at 'extreme bearish' 1.9, contrarian buy signal for risk assets triggered: median 3-month returns post buy signal imply = US stocks 5.4%, global stocks 7.6%, stocks vs IG bonds 9.1%, HY bonds vs Treasuries 6.4%."
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12. Global Equity Risk-Love. The contrarian sentiment indicator "slid to the 33rd percentile of history from the 81st percentile in July, as investors grapple with the ramifications of a higher-for-longer interest rate regime."
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13. Equity fund flows. "Another flat week of equity flows."
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14. Private client flows. "Private clients buying energy, bank loan, munis and selling utilities, staples, TIPS ETFs past 4 weeks."
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15. HF trading flow (I). "Hedge funds reduced net length in mega cap tech but have been selling other US stocks at a much faster pace."
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16. HF trading flow (II). "Sector positioning has gotten broadly more bearish so far in October, with hedge funds net selling TMT, Cyclicals, and Defensives."
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17. Global HF flows. "In terms of global hedge fund net flows, the 4-week selling is approaching an extreme."
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18. HF short flows (I). "Single stock short flow make up ~75% of all US shorting activity since the start of August and is at a YTD high."
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19. HF short flows (II). "HF short additions slowing from a peak pace. Gross flows have tended to fall from elevated levels as markets rebounded (and vice versa)."
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20. HF exposure (I). "Overall book Net exposure has decreased further to one-year lows."
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21. HF exposure (II). "Overall book long/short ratio is at fresh five-year lows following the recent decrease, while Fundamental L/S long/short ratio is in the 24th percentile."
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22. HFs vs. Staples. "Consumer Staples is among the most net sold sectors in October, driven by short sales outpacing long buys ~2 to 1."
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23. HFs vs. Tech. "Info Tech is the most notionally net sold sector so far in October, driven almost entirely by long sales which suggests de-grossing behavior."
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24. SPX skew. "SPX 1m Skew (25dp vs 25dc) has steepened dramatically over the last few sessions," which suggests investors are paying up for downside protection.
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25. VIX backwardation. The $VIX entered backwardation for the first time in a year, "a telltale sign of mounting distress, as traders anticipate more volatility in the near-term than further out in the future."
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26. Weak bull. "Most unconvincing and worst new bull market for the S&P 500, equal-weight index, and Russell 2000."
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27. Q3 earnings update (I). With 17% of $SPX companies reported, "eight of the 11 sectors are reporting (or are expected to report) year-over-year earnings growth, led by the Communication Services, Consumer Discretionary, and Financials sectors."
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28. Q3 earnings update (II). "73% have reported actual EPS above the mean EPS estimate ... [which is] below the 1-year average (74%), below the 5-year average (77%), and below the 10- year average (74%)."
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29. Q3 earnings update (III). "Six sectors are reporting a year-over-year increase in their net profit margins in Q3 2023 compared to Q3 2022, led by the Communication Services (12.2% vs. 9.8%) sector."
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30. Q3 earnings update (IV). And finally, “the market is punishing positive earnings surprises reported by S&P 500 companies on average.”
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Have a great weekend!
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