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If you enjoy today’s article, feel free to share it or like it, as it greatly helps. But first, here is a fun poll.
Now let’s begin.
1. April tends to be a strong month for the S&P 500
“April is the second best month of the year for the stock market. From 1928 through 2022, the S&P 500 was up 1.4% on average during the month, second only to July's 1.7% average gain. The S&P 500 is up 1.5% since the end of February through today (chart). That's impressive given that Silicon Valley Bank imploded on Friday”.
2. Good omens for 2023 returns
“In the first quarter of 2023, the S&P 500 avoided revisiting the December lows; advancing by ~6%. When stocks stay above the December low in Q1, the S&P 500 tends to have a great year. In the 35 occurrences where this has happened since 1950, the S&P 500 ends the year up 18.2% on average. In only two of those years, it ended the year negatively”.
3. Sectoral reversion this week
“Three sectors (tech, communication services, discretionary) continue to dominate this year. But this week saw a broad reversal across all 11 sectors as materials and industrials turn positive for the year”.
4. Investors pile into cash
“Investors are piling into cash at their fastest pace since the pandemic, unnerved by a series of bank runs while seeking out higher interest rates at money-market funds During the first quarter this year, investors poured $508 billion into cash funds in their most significant quarterly inflow since the early days of Covid-19 three years ago More than $100 billion have flocked into money-market funds in the past two weeks alone”.

5. Savings rate creeps up to 4.6%in Feb
“The saving rate plunged to historic lows last year as Americans saved less to keep spending. Now, it's creeping back up -- maybe a sign that households are exhausting excess savings, or are getting nervous about a recession?”.

6. Consumer loans at record highs
“Consumer loans is at the highest level EVER seen Banks tightening lending standards will likely increase the default rate on these loans”.

7. Credit flows and growth
“History is littered with examples of tighter credit conditions leading to higher unemployment and slower economic activity”.The biggest banking scare since the 2008 financial crisis will ricochet through the economy for months as households and businesses find it harder to gain access to credit.
That’s the scenario facing the US after the collapse of three regional lenders, and a giant global one, over an 11-day span, according to several economists. Federal Reserve Bank of Minneapolis President Neel Kashkari, in a March 26 interview on CBS’s Face the Nation, said the turmoil “definitely brings us closer” to a recession and noted that officials are closely watching for signs of a widespread credit crunch”.
8. Durable good spending unwinds from pandemic highs
“The pandemic surge in durable goods share of spending has been unwinding”.
9. Dip buyers are being rewarded in 2023
“Wild stock market reversals put dip-buyers on pace for historic year. The outperformance is happening as credit-market stress eases, helping push the S&P 500 up four of the last five days. It rose 1% Wednesday to fully erase its losses after the collapse of several regional banks three weeks ago”.
10. Fundstrat thinks bears are trapped
“The S&P 500 has now posted two consecutive quarters of gains, a pattern not seen in any bear market over the past 50 years. This solidifies our view that 10/12/22 was the bear market low and we are 6 months into a bull. It is the bears who are trapped”.

11. Hedge fund net exposure at 5-year lows
“According to GS Prime data, hedge fund net exposure remains near 5 year lows and has not moved meaningfully in the last 4 months”.

12. US banks holding $620b in unrealises losses
“US banks have $620 billion of unrealized losses on their books. Most are strong enough to withstand the paper losses. Still, their finances could be squeezed for years to come”.
13. Markets increasingly confident banking crisis is over
“But Apollo's Torsten Slok cautions against complacency - he sees 1.25% hit to GDP if current levels of stress continue, lower baseline GDP forecasts in coming years, tighter lending standards to raise hard landing risks”.

14. Fed balance sheet expands by $370b in March
“In March, the Fed’s balance sheet expanded by $370B. The only comparable instances in history; March 2020 Covid Crisis, and the Fed’s policy response to Lehman Bro’s failure during the 2008 GFC".

15. Fed balance sheet declines in last week of March
“After surging over past couple weeks, Fed’s balance sheet registered a decline this most recent week”.
16. Fed lending is up, but QT is still on
“Last week, the Fed added $314m net to its Treasury security holdings and trimmed $7bn net from its mortgage-backed security (MBS) holdings. The total amount of Reserve Bank credit rose by $38bn net”.
17. Fed balance sheet accounts for majority of S&P return
“It’s all about liquidity. According to BofA, Fed balance sheet expansion is responsible for 51% of the SPX returns since the GFC, by far the biggest driver of returns. Earnings account for 23%, and multiple expansion most of the remaining”.

18. M&A volumes see the largest decline since 2001
“Europe was the chief laggard this past quarter, with regional deal activity down 63 per cent to $81.6bn, while the US saw a 47 per cent drop to $271.7bn and the Asia-Pacific region only declined by 24 per cent to $134.6bn”.

19. US corporate profits down 2%
“U.S. corporate profits fell by 2% q/q in 4Q22 ... a notable decline but not drastic relative to other drawdowns in past decade”.
20. MMF assets reach new highs, at $5.2 trillion
“The amount of money parked at money-market funds climbed to a fresh record in the past week as banking concerns continued to rock global markets and attractive rates lure investors. Money-market funds have been scooping up cash recently, fueled in large part by depositors pulling their money away from US banks. Initially much of that flow was driven by more attractive rates, but concern about the steadiness of some smaller lenders helped turbocharge that this month”.
21. Fixed income flows pivot to safety
“Outflows from the riskier parts of the fixed income world. Inflows into “safer” ones”.

22. Equity outflows continue
“Weekly equity flows show an outflow of $8.63 billion in the last week”.

23. Passive flows still king
“Passive equity flows remain positive”.

24. No love for the small caps
“Small caps’ weight in multi-cap funds has generally been shrinking over time”.

25. Moving chairs
“There are around 26 constituent changes per year, each constituent change associated with an add and a corresponding drop to maintain that 500 company composition”.
26. Big caps increase S&P share
“Systemically important stocks such as Meta, Amazon, Apple, Microsoft, Google, Tesla, and Nvidia, increase their share of the S&P 500 (by market cap) a further 5% since the low”.

27. Thanks, big tech!
“You can thank big tech for your portfolio's surprisingly strong March. Big tech is heading for its strongest month vs. the rest of the S&P 500 in almost 12 years. Without big tech, the S&P would be down 0.7% (vs. up 1.5% like it is now)”.
28. Long term inflation expectations tumble
“Longer-term expectations of inflation are tumbling across the the different survey measures we have for the US (blue). The Fed's 475 bps in hikes have no doubt helped anchor longer-term inflation expectations, but now it's enough. No more hikes please”.
28. Demand-driven inflation cools
“Demand-driven inflation cooled slightly in y/y terms in February. Core goods inflation has become more volatile of late while services and services ex housing remain on the stickier side”.

29. Spot prices tumble, deflation arrives
“Food and Beverages: Deflation comes in February Average spot inflation -3.4% y/y. Down 467bps versus last month”.

30. Commodities in short supply
“Large amounts of manufacturers in key industries still cite supply chain constraints as more binding than before the pandemic, especially in the case of semiconductors and other electronic components. All those dislocations are a large part of the reason why US real GDP growth was so weak, especially at the beginning of 2022, and why inflation has been such a persistent and global phenomenon”.
31. Capacity constraints
“In several key US manufacturing industries, materials shortages are still extremely acute—in the recently released data for Q4 2022, nearly 60% of American computer and electronic product manufacturers were not able to operate at full capacity thanks to materials shortages alongside nearly half of transportation equipment manufacturers”.
32. Capacity constraints (2)
“some chip prices have been falling recently and areas of the semiconductor industry now look to be in a supply glut, the complexity of electronics supply chains and the wide variety of chips necessary for many products means that some components remain in short supply and the semiconductor shortage is evidently still binding for many firms”.
33. Eurozone inflation cools but core prices still hot
“Eurozone inflation cools significantly to 6.9% YoY in March, down from 8.5% in Feb and lowest level since Feb2022, AND lower than estimated 7.1% BBG poll. But core inflation, which excludes volatile items, quickened to 5.7%, a fresh ATH, showing inflation pressure remains high”.
/ Additional take /
“Underlying inflation in the euro area hit a record in March, with core prices rising to 5.7% even as headline inflation dropped to 6.9% from 8.5%”.
34. Biggest drop in UK home prices since 2009
“The UK House Price Index fell -0.8% MoM and -3.1% YoY in Mar, down from -1.1% YoY in Feb. This is the largest annual decline since July 2009”.
35. US pending home sales are down 20%
“Whoa. Pending Home Sales down 20%+ on a y/y basis for a record 9 straight months”.
36. Average 30Y mortgage tops 6.3%
“Average 30-Year Mortgage Rate in the US... 1970s: 8.9% 1980s: 12.7% 1990s: 8.1% 2000s: 6.3% 2010s: 4.1% 2020s: 4.0% --- All-Time Low (Jan 2021): 2.65% Today's Rate: 6.32%”.
37. Hotel occupancy is down 6.3% vs 2019
“Reflecting the normal ebb and flow of spring break season, U.S. hotel performance decreased from the previous week, according to STR‘s latest data through March 25”.
38. Rents are back on the rise
“MoM rental prices rise for the second consecutive month in March”.

39. Americans are flying again
“Data from the TSA shows the average daily checkpoint travel numbers are 20% higher than they were last year: 2019 (2.10m), 2020 (1.71m), 2021 (0.95m), 2022 (1.76m), 2023 (2.11m)”.
40. Consumer sentiment down for first time in 4 months
“Consumer sentiment fell for the first time in four months, dropping about 8% below February but remaining 4% above a year ago. This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank. Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead”.
41. Market breadth weakens
“Curious to hear the market technicians' takes on this one? Narrow leadership is NOT typically what you see in a bull market ... it's usually a warning sign that conditions are not healthy. Just saying”.
42. Liquidity?
“The liquidity of the market confirms a volatile environment. Less liquidity = higher vol, smaller volumes create more price noise”.
43. Consumer spend falls 0.2% vs 0.3% expected
“Consumer spending fell to 0.2% m/m vs expectations of 0.3% m/m. Good for inflation, bad for business. The prior reading was 1.8% m/m in January, partially due to seasonal effects”.
44. Feb personal incomes +0.3 vs 0.2% expected
“February personal income +0.3% m/m vs. +0.2% est. & in prior month; personal spending +0.2% vs. +0.3% est. & +2% in prior month (rev up from +1.8%)”.
45. Jobless claims climb
“Continued jobless claims are up 12.8% y/y. The average recession start was dated when the y/y change was +7.2%. The last three recession starts (ex. covid) 1/5/2008: +12.4% 4/7/2001: +26.4% 8/4/1990: +10.5%”.
/ /
“Jobless claims are now well above the average of 2018, 2019, and 2022, years with very strong labor markets”.

46. Worst IPO quarter since 2009
“US equity capital markets are having the slowest start to a year since 2009, and dealmakers fear a rebound is nowhere near. Initial public offerings and secondary stock offerings bore the brunt of first-quarter recession concerns stemming from the Federal Reserve’s aggressive rate-hike cycle and the flight to safety over fears about the banking system after the collapse of Silicon Valley Bank. This comes on the heels of a historic slowdown in 2022. ”.
47. Mentions of weakening demand on calls surge
“BofA's keyword analysis of earnings calls that took place in the first quarter show that mentions of "weak demand" have reached levels not seen since the COVID-19 pandemic. Consumer weakness may be partially to blame. BofA aggregated credit and debit card spending growth year-over-year in furniture and apparel has been negative for the last several months, the firm noted”.

48. Global shipping rates edge lower
“Global shipping rates continue to edge lower, emphasizing that worst of supply chain crisis is definitively behind us ... price boom looks to be almost completely over for nearly every major route”.
49. Cass Freight Indices signal recession
“The Cass Freight Indices are rolling over, something that typically happens just before a recession”.
50. CTA/HF oil shorts
“It's rare to see CTAs/HFs get this short when the curve is backwardated. Reminder: Shorts suffer negative roll-yld during periods of backwardation. CTA shorts = fuel for a bull run”.

51. Manufacturing PMI in contraction territory
“Manufacturing PMI has been in contraction territory as the economy continues to weaken New Orders is at a level seen only 3 other times since 1997 Each occurrence was met with a recession”.
52. US currency composition falls 12% in two decades
“In terms of currency composition of global foreign exchange reserves over time, yes the dollar has been *steadily* eroding. Nothing dramatic here. About a drop of 12% over 22 years. No need to panic. Countries can and do still trade outside of the US dollar!”.

53. South Korean chip demand cools
“South Korean chipmakers reduced their production by the most since 2008 in February, a sign of declining semiconductor demand that may be deeper and longer-lasting than feared. Production dropped 41.8% from a year earlier, worsening from a 33.9% fall in January, according to data from the national statistics office. Inventories increased by 33.5% and factory shipments fell 41.6%, adding to signs of continued weakness”.
54. China PMI sees boost
“China March PMIs -reopening boosts (domestic) New Orders --trade orders not so much)”.
55. Churn Wars
Monthly blended average churn for the world’s biggest streamers.
That’s all she wrote!
Thanks for reading,
Conor
Americans vs rising rates? Leverage more 😂
Thanks for sharing Conor!
Thank you! Great insights with Commonstock and Fundstrat charts. And interesting MenthorQ Pro’s content on Twitter