Daily Chartbook #375 🔓

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1. OECD 2024 outlook. The OECD lowered its inflation forecast for most economies and raised its global GDP outlook.

2. Trucking market. "Trucking spot rates have thawed. Up $.23/mile or 15% since November. This is unusual and a great sign for continued recovery in the trucking market."

3. ISM Services PMI. ISM Services PMI rose by more than expected in January, increasing to 53.4 from 50.5. Notably, the Prices subindex (blue) rose to an 11-month high, reflecting inflationary pressures driven by higher shipping and commodities prices.

4. SLOOS. "Surveys continue to suggest that while lending remains tight, the rate of tightening has eased. Normally by the time this rolls over, it means a recession already happened, but fiscal dominance has been a big cushion alongside private lending this cycle."

5. Perception vs. reality. "Americans' perception of current economic conditions and government economic policy are worse than the usual relationships with economic conditions would suggest."

6. Crypto asset flows. Digital asset investment products saw $708 million in inflows last week, bringing YTD flows to +$1.6 billion.

7. USD sentiment. "The combination of subdued global demand and a relatively overpriced Fed suggests to us that the broad environment remains favorable for the dollar."

8. Sentiment Indicator. Goldman's positioning indicator is rising but not yet stretched.

9. Corporate insiders. The Insider Transaction Ratio has moderated and is now in neutral territory.

10. US fund flows. "US + global equity fund flows are turning positive on a rolling 3-monthly basis, this is generally a bullish sign and represents a sort of bullish band-wagoning effect."

See: ,

11. Cyclicals vs. Defensives. "Investors continued to demand technology funds while both cyclicals ex. tech and defensives—utilities in particular—saw outflows."

12. Global equity positioning. "Deutsche Bank’s positioning index signals that investors are overweight stocks, though not yet at extreme levels."

13. HF trading flows. "Info Tech, Health Care, Industrials, and Real Estate were the most notionally net bought sectors [last] week, while Comm Svcs, Energy, Financials, and Materials were the most net sold."

14. HFs vs. Tech. Hedge fund allocations to Tech are in the 90th percentile on a 5-year lookback.

15. HFs vs. Financials. "The sector was net sold for the second straight week and has now been net sold in 7 of the last 9. US Financials long/short ratio is currently at 1.62, which is hovering 5-year lows in the 3rd percentile."

16. Stocks vs. cash. "US equities finally outpace cash in this rate cycle."

17. SPX streak (I). "The S&P 500 last week posted a 1% gain for the 4th consecutive week. That’s tied for the longest stretch since 2016. Over the past quarter century, this sort of sustained strength has supported the view that the most bullish thing the market can do is go higher."

See:

18. SPX streak (II). "SPX has traded higher on the calendar week for 13 of the last 14 … this phenomenon has not happened in almost 30 years."

19. Call vs. put skew. "Given the constant bid to stocks, it's no wonder that SPX upside vol skew is at the highest level in 20 years … meanwhile, put vol skew is at ~20y lows."

20. Weak February. "February has been quite weak historically, especially in an election year. Not to mention the past two times the S&P 500 gained >20% for the year, the following Feb was quite weak (-3.1% in '22 and -8.4% in '20)."

21. Small vs. Large. "As they await more definitive confirmation on whether a higher nominal growth environment is coming, small caps are being weighed down by a weakening margin profile and higher leverage."

22. Small-caps vs. real rates. Higher leverage "is likely one reason why the correlation between real rates and returns remains negative for small caps, diverging from the correlation between rates and returns for large caps which is now modestly positive."

23. Mag 7 vs. SPX: Sales. "Bottom-up consensus expects the [Magnificent 7] will collectively grow sales at a 12% CAGR through 2026 compared with an 3% CAGR for the remaining 493 companies in the S&P 500 index."

24. Mag 7 vs. SPX: Margins. "Consensus expects the seven stocks will expand margins by 256 bp during the next three years compared with 44 bp for the rest of the market."

25. Mag 7 vs. SPX: Valuation. "Our valuation model indicates that the group’s fast expected growth and high quality attributes largely explain their premium valuation."

26. Semis inventories. "Inventory levels remain extreme, and we could see some destocking over the coming quarters, putting pressure on demand. This is likely to translate to weaker pricing and margins for the sector."

27. Q4 beats & misses. "Companies that beat on both sales and EPS outperformed the S&P 500 by 140bps the next day, largely in line with the historical average. But misses were penalized more than usual, underperforming by 430bps vs. a typical -240bps."

28. Q4 margins. Margin beats remain above average but are below last quarter.

See:

29. Margins vs. demand. "Margins already started improving and we expect even further improvement once demand starts to improve."

30. 2024 EPS revisions. And finally, “2024 consensus EPS has been cut by 0.7% YTD, led by Energy and Materials.”