Daily Chartbook #51

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

1. US petroleum inventory levels. Stocks for crude, gasoline, and distillate for the week ending September 23.

2. “Strategic” (I). 160 million barrels have been drained from US strategic midterm reserves since the start of the Russia/Ukraine war.

3. “Strategic” (II). "The US Strategic Petroleum Reserve has moved down to 423 million barrels, its lowest level since 1984. The 29% decline this year is already the largest ever for a calendar year by a wide margin, and there's still 3 months to go".

4. WTI price forecast. Oil & gas executives expected WTI crude to average $80 to $100 per barrel through the end of the year

5. Production cuts ahead? OPEC+ may look to introduce more production cuts to sustain a $90 a barrel price target.

6. Homebuilders. Homebuilder sentiment is deteriorating.

7. Less bang for your buck. How much home a $2500 mortgage will get you today (assuming 20% down, 30Y fixed).

8. Would-be homebuyers hesitate. Mortgage applications dropped 3.7% and "are down 29% from a year ago, off 43% from their seasonally adjusted peak in early 2021".

9. Pending home sales drop. Pending home sales decline by 2% in August (vs. -1.5% expected). "This is the 9th monthly decline in the last 10 months to its lowest since May 2011 (ex-COVID lockdowns)."

10. US trade deficit narrows. "Quite a rebound in goods deficit, which snapped back to $87.3 billion in August vs. $89 billion est. & $89.1 billion in prior month".

11. Inventories. Retail inventories (orange) increased 1.4% (vs. 1% expected) while wholesale inventories (blue) rose for the 25th consecutive month (+1.3% vs. +0.4% expected).

12. Unemployment rates. "Jobless rates were lower in August than a year earlier in 384 of the 389 metropolitan areas and higher in 5".

13. FOMC expectations. "The FOMC now expects higher interest rates, lower real GDP growth, and higher unemployment across the next two years—and for the inflationary surge to only fully subside by 2025".

14. Rough credit conditions. "Credit conditions for borrowers in North America remain strained, and could quickly deteriorate further amid the economic slump in the U.S and the sharp rise in benchmark interest rates".

15. Chicago NFCI. "The National Financial Conditions Index (NFCI) ticked up to –0.14 in the week ending September 23, suggesting financial conditions continued to tighten".

16. Even tighter. The "Fourth Wave" of tightening has taken the GS US Financial Conditions Index well above its previous peak.

17. Delayed effects. The effects of tightening won't show up in economic data until midway through 2023.

18. Corner office sentiment. CEO confidence is near 40-year lows.

19. Relief in commodities. "Consumer-related commodity pullbacks this year".

20. USD vs. commodities. The "positive rolling 60d correlation between U.S. dollar (blue) and [Bloomberg] Commodity Spot Index (orange) didn't last long ... interestingly, last time it turned swiftly negative in 2020, dollar collapsed while commodities surged (opposite today)".

21. Sectors vs. Fx. Yesterday we highlighted historically elevated currency volatility. Which sectors are most exposed to changes in currencies?

22. Risky vs. Safe. Fund flows are still favoring safe assets.

23. US10Y yield 4%. The yield on US10Y Treasury bonds topped 4% for the first time since 2010.

24. Equities/Bond portfolios. The 50/50 US equities and government bonds portfolio is having its worst year in a century.

25. Retail & institutional sentiment. Still very bearish.

26. IPO drought. "Far fewer IPOs have been completed during 2022 than in any of the past 25 years, with the exception of 2008".

27. GFC analogy. The S&P 500 from the Great Financial Crisis (black) vs. 2020-present S&P 500 (red).

28. Bad breadth. "As the markets reach a new 52-week low, so has the number of SPX stocks holding their longer-term trends. Currently, only 10% of the entire S&P 500 is still trading above their 200dma, which ranks 3%ile over the past decade." Prior to today’s session.

29. Relatively cheap small caps. "S&P Small Cap 600 at 20+-year low forward P/E in absolute terms, and as cheap vs. S&P 500 as it was just after the dot-com peak in 2000".

30. Greener grass ahead? And finally, the months in the final quarter of the year have historically produced above-average returns. "In fact, October is the best month of the year during a midterm year."

Thanks for reading!