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1. Don’t call it a comeback
"The biggest Bear Market declines have historically preceded the biggest Bull Market recoveries. Since 1880, the SPX averages a +40% 1Y return and +54% 2Y return off major Bear Market lows”.
2. What’s your degree of confidence? I am not uncertain.
“The Conferenceboard Consumer Confidence Index increased 0.8 pts to 104.2 in March. The Present Situation Index fell -1.9 pts to 151.1, and the Expectations Index grew 2.6 pts to 73.0”.
3. Corporate profit margins
“Profit margins, slipped to 11.7% in Q3, and we expect there was further compression in the final quarter of the year. Input costs remain elevated, particularly for labor, which likely dented margins. Furthermore, operating margins of the S&P 500 index fell to 10.9% in Q4. While S&P margins are narrower in scope and more volatile, the timely release makes them a useful gauge in proxying economy-wide margins”.
4. Wells says Global Recession off the table
“We No Longer Forecast Global Recession. The upward revision stems from a U.S. economy that remains resilient, while the Eurozone, U.K., and Chinese economies all appear healthier than initially expected. We now forecast the global economy to grow 2.2% this year, up from a prior forecast of under 2% last month”.
5. Negative sentiment streak
“Since 1987, the only longer streak of net negative sentiment towards the stock market was surrounding the Financial Crisis”.
6. Scared money don’t make no money
The ratio of risky vs safe asset flows implies there is a lot of flight to safety.
7. 72% of inflows go to bond ETFs
“Investors still diving into government bond ETFs, which have taken nearly 72% of all inflows over past month ... U.S. broad equity ETFs saw outflows over past week and precious metals saw relatively small inflow”.
8. Something to keep an eye on
“With tons of focus on perceived “strength” of consumer these days, worth pointing out that inflation-adjusted consumption can rise at start of recessions … that was indeed true in 2008, as real PCE kept expanding until peak in May 2008 (a couple months after Bear Stearns)”.
9. Its 2020 again
“Last week, crypto funds saw the largest inflows since July 2022”.
10. A licence to kill…. the financial system
“Warning signs are developing in what is a completely unregulated segment of the financial markets with substantial amounts of hidden leverage and opaqueness”.
11. On second thought, I’ll walk
“The avg rate for a 60-month new car loan rose to a 13-year-high. With the price of new cars and trucks up 5.8% on a YoY basis, people are still applying for vehicle loans at a rate consistent with 2019, but are getting rejected".
12. Getting your 5 a day just got pricier
“Shortages of fruit and vegetables helped push UK food inflation to 15% in March, its highest since records began in 2005”.
13. S&P buybacks down in Q1
“S&P 500 buybacks were down YoY in 4Q; BofA client buybacks in 1Q are also down YoY”.
14. Size matters
“Size matters when rates are high and the banking system is cracking. The Russell 1000 large-cap index is beating the Russell 2000 small-cap index this month by the biggest gap since COVID (and fourth-biggest in history) A look at stock performances by size”.
15. Bank cash is on the up
“Banks' Cash-ratios rose sharply recently due to increased borrowing”.
16. Major central bank rate forecasts
“Banking sector challenges seem to be contained, given the Swiss government's backstop and liquidity provisions (for now), which likely prompted SNB policymakers to deliver further tightening to contain inflation. In our view, SNB tightening is not over yet, and we believe another 25 bps hike will be delivered in June”.
17. Often but not always
“The last hike is often (but not always) quickly followed by a cut”.
18. CapEx sensitivity
“GS with a report about potential for meaningful slowdown in capex growth. Good chart showing revenue sensitivity to capex spending. They highlight that one wildcard is its not clear how much of capex is now less tied to macro/earnings b/c of IIJA/IRA type funding”.
19. Citizens’ approval
News of the SVB acqusition drove an epic rebound for First Citizens bank’s share price.
20. Has the bubble burst in US housing?
Real American house prices have fallen for eight consecutive months.
21. Housing affordability, meet global pandemic
“The pandemic coincided with a historic deterioration in housing affordability. That'll happen when mortgage rates spike 3 percentage points just after U.S. home prices ran up 41% during the Pandemic Housing Boom. The chart doesn't show it yet, however, housing affordability has improved *a bit* over the past 5 months. Mortgage rates coming off the 7% highs coupled price corrections in some markets. Of the 3 affordability levers, mortgage rates is the one that can make the biggest impact in the short-term”.
22. Housing still be damn expensive though
“Housing affordability is worse now than in 2008” despite house prices falling.
23. Real incomes find footing
“Consumers have increasingly relied on their balance sheets to spend, but as inflation has begun to subside, real income has found firmer footing. Income growth is converging back toward spending and has become a key driver of spending. For February, we expect to see personal income rose another 0.3%. The sturdy jobs market and still-elevated levels of excess saving can help sustain spending beyond February even amid the recent flare-up in the banking sector potentially constraining future reliance on credit cards”.
24. Tech bros can’t catch a break
“Coders can't catch a break. As interest rates rose, the number of job listings for software developers crashed. Lofty tech valuations weren't the only thing tenuously held up by low rates”.
25. Tis just a scratch
“The US Treasury owes the Federal Reserve about $40bn to cover the central bank's operating losses. But this big IOU is hardly a fiasco. The bank usually pays its profits to the Treasury, but in the future, it won't. It will just book the profits against this liability”.
25. Lending standards & defaults
“We'll likely see the consequences of the recent events in banking down the road. All other things being equal, it's pretty clear that bank lending standards are going to tighten from here. Note that lending standards were already at levels consistent with recessions of the past.”.
26. Holdin’ all the loans
“A lot of discussions about CRE and the fact that small banks hold ~70% of loans”.
27. Got that shrinking feeling
“American banks have become less profitable over the last 20 years. Before the GFC, they produced an average return on common equity (ROCE) of 14%. Since then, it's dropped to 8%”.
28. The Eastern IPO boom
“The Middle East and north Africa saw a record 51 initial public offerings last year and raised $22bn, a 179% increase on 2021”.
29. Big caps stay big
“When we kicked off the post-Covid era, many hypothesized that we would see a repeat of the Dotcom cycle reversal between Big Tech and small value. By and large this has failed to emerge.”.
30. Unhealthy trend
American life expectancy takes a tumble.
31. MTV cribs
“Home Equity is the single largest component of the net worth of most Americans. And that's true across all age groups”.
“Traffic to bing dot com is growing fast but not as fast as traffic to ChatGPT, the home of ChatGPT, where the most recent seven days of traffic data are up 21.3% from the week before”.
33. Inflations expectations fall
“Survey-based and market-based measures of inflation expectations are falling quickly, and the Fed will soon be talking about this as an important reason why they can allow themselves to be more dovish and ultimately start cutting rates”.
34. That’s steep
“In March, U.S. Yield curve steepened most since 2008 as traders rapidly priced Fed cuts”.
35. Together, as one
“Over the last 30 years the percent of US bank deposits in small banks has risen from 21% to 32%. While no individual small bank is systematically important, collectively they are.”.
36. BTFP not BTFD
“The Fed’s BTFP facility visualized”.
37. Ozzy summer home is on the cards
“House prices down under are falling faster than drop bears—things in the lucky country are in a real estate of disarray”.
38. China’s paper problem
“China has become a prolific publisher of academic research. But its 'paper mills' have produced fraudulent studies that risk serious real-world consequences”.
39. China’s crude love affair
“For all the jibber-jabber about slowing Chinese demand — whether due to climate change policies or restrained economic growth — the Middle Kingdom is gulping more and more crude. And the trend is set to continue”.
40. The talk of the town, AI
C-suite executives are ready to make their entire personality revolve around AI.
That’s all she wrote!
Thanks for reading,