YOUR QUIVER | February 14, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Inflated Consensus
While the inflation print this morning was a bit more than “expected,” a lot of folks were already expecting that…so we’re not seeing markets tank at the open here. In fact, they’re up. OER (owners equivalent rent) is getting better, slowing m/m and looking like it has hit a top over the past few months. Powell’s been focused on core services ex shelter, which has been only increasing by 0.25% m/m—versus much higher previously. So, investors today are finding some relief.
Earnings Recession
A weak Q422 earnings season is fueling analysts’ forecast for an earnings recession ahead (Reuters).
Let's Party
BofA’s Global Fund Manager survey showed that investors are the least pessimistic in a year—yet they are still underweight stocks, tech, and US positions relative to the prior decade’s levels. Investors are long bonds, banks, EM and cash—plus their odds of recession have declined to 24%, the lowest level since Jun 2022—after a peak of 77% in Nov 2022.
Sticker Shock
NOSO is out with stats that sticker prices for US new cars ave $50k, up 30% from 2019 levels. The ave mo payment for a new car is at $777, nearly doubling from 2019 per BBG. Europe is also at record levels, and used car prices are up a lot in Japan too. Part of the reason is the shift to EVs, which are 25% more than the ave car. Musk is getting some sticker shock this morning, too. Tesla workers in NY are looking to unionize, seeking better pay and job security. Given that they label the data for Autopilot tech, Musk should be careful being penny wise and pound foolish.
Expected Outcome
Ueda was nominated to be he head of the BOJ. So, we’ll probably see stimulus come down, and eventually a rate hike later this year. “Mr Yen” Sakakibara says the yen will probably strengthen to roughly 120 per dollar in 2023.
From Balloons to Lasers
We’re not talking about a 10 year old’s birthday party. The US is reporting that China aimed a military-grade laser at a Philippine ship in an area claimed by both countries. Seems like this is not headed towards a peaceful place…
Hawks Are Back in the UK
Wages rose 6.7% in 4Q22, the most since records began in 2001. So, expect the BOE to hike rates next month to combat inflation. Consensus is for a 25bps hike to 4.25% then a pause. Employment rose 74k, and the jobless rate remained at 3.7%. In Dec, 843,000 working days were lost to strikes, the most since 2011.
Crypto Contagion
A draft proposal from the SEC would make it harder for hedge funds, p/e shops, and pensions to work with crypto firms, as it would be harder for them to be “qualified custodians”….meaning they can’t hold client assets for money managers, who themselves don’t want to be considered custodians holding assets.
Oil Down
The US says it will sell more from reserves, so oil is down. But we’ll get more insight from OPEC’s report today…..and remember, when the US sells down reserves, eventually it buys them back. So, that should tell you something.
Brainard at the Helm
Biden will name the Fed’s Brainard as his top economic advisor.
Double Witch Coming Up
Vol typically has increased in the wake of a highly anticipated news. Incremental jitters may not dissipate as quickly as usual, because we’ve got expirations on Friday. Options participants caught with an aggregate “short gamma” portfolio may have to transact in the direction of the underlying momentum. Plus, with a long weekend coming up (Prez Day on Mon), there could be thinner liquidity ahead of the “double witch” event.
