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Economy

Job Openings, Unemployment Rate, and S&P CorrelationsHere is a graph showing the correlations between the leading indicators of the economy, Job Openings, Unemployment Rate, and the S&P. It can be seen from the charts that the Job Openings (.a) historically begin to decline before there is any change in the unemployment rate. A simple explanation for this could be, less jobs, more people unemployed. Once the unemployment rate begins to creep up (.b); historically this has led to a sell off in the S&P.
FRED:UNRATEShort
by International_Leeroy
Higher for LongerUS inflation data in July 2023 provided mixed signals. While Consumer Price Index (CPI) is moving in the right direction, producer price inflation suggest pipeline pressures are picking up. Core CPI, which excludes often-volatile food and energy costs, rose only 0.2% for a second month in a row . However, US producer prices picked up in July, owing to increases in certain service categories. This likely buys more time for the Federal Reserve (Fed) to deliberate on the future path of monetary policy. The flows into bond exchange traded funds (ETFs) have been volatile. Over the past year, investors were starting to embrace duration. Investors were positioned for recession, inflation crash, and Fed cuts - evident from $31.7bn inflows to Treasury bond ETFs on pace for a record year2. However, investors are starting to pull out of the biggest bond ETFs devoted to Treasuries. More than $1.8 billion came out of the $39 billion iShares 20+ Year Treasury Bond ETF last week, the most since March 20203. Sentiment toward long-dated Treasuries has soured over the past month amid growing conviction that the Fed will keep interest rates at elevated levels for an extended period. We expect rates to remain higher for longer and are unlikely to see the Fed cut rates until the Q1 of next year amidst a stronger US economy. Don’t celebrate on disinflation just yet Overall, the US economy continues to show extraordinary resilience despite monetary constraints and credit tightening. While inflation has shown encouraging signs of decline, we caution that the level remains high. Strong July retail sales raise the risk of a re-acceleration in inflation. The four biggest categories of the ex-auto’s component saw outsized gains: non-store retailers, restaurants & bars, groceries, and general merchandise. Amidst a tight US labour market, with unemployment at historic lows and wages continuing to rise, the downward pricing momentum in the service sector is likely to be at a slower rate. Commodity prices are also beginning to rebound from the weakness seen in Q2 2023. Energy prices have been rising on the back of Organisation of Petroleum Exporting Countries and its allies (OPEC+) production cuts. If commodity prices extend their recent momentum, it could pose upside risks to inflation. Fed Officials remain divided Messaging on a somewhat mixed inflation outlook from the Fed Officials remains a mixed bag. One faction remains of the view that rates hikes over the past year and a half has done its job while another group contends that pausing too soon could risk inflation re-accelerating. Fed governor’s Michelle Bowman and Christopher Waller remain in the hawkish camp, hinting at more rate increases being needed to get inflation on a path down to the 2% target. Futures markets are assigning about a 11% chance of a 25-basis-point rate hike when the Fed next meets on 19 and 20 September4. Additionally, rate cuts have now been completely taken off the table until perhaps later in the Q1 2024. The latest Fed minutes reveal commentary from officials, including the hawks, such as Neel Kashkari, suggest a willingness to pause again in September, but to leave the door open for further hikes at the upcoming meetings5. Opportunity for a yield seeking investor It’s been an impressive turnaround since the pandemic when negative real yields became the norm. TINA- ‘There Is No Alternative’ to equities, is over now that evidence of the shift to a 5% world appears stronger than ever. Today investors have the opportunity to lock in one of the highest yields in decades, with US two-year yields paying close to 5% exceeding the yields at longer maturities without the volatility witnessed in the 10-year sector. A resilient US economy is likely to keep interest rates and bond yields higher for longer. Sources 1 Bureau of Labour Statistics as of 10 July 2023 2 BofA ETF Research, Bloomberg as of 9 August 2022 - 9 August 2023 3 Bloomberg as of 14 August 2023 4 Bloomberg as of 17 August 2023 5 federalreserve.gov as of 16 August 2023 This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
FRED:FEDFUNDS
by aneekaguptaWTE
Market conditions STILL don't foretell a market crash soonBack in May I made a post "Market conditions don't foretell a market crash soon." Here we are almost four months later and not much has changed. Again, some points here looking back to 2001. (2020 was an irregular event). Sorry for all the colors here, but everything is connected. 1. The Fed Rate (FEDFUNDS dark purple) falls before unemployment rises and recession. Note that the market rose while the interest rate was at its peak in 2006-2007 and 2019. 2. There are still more job openings than people to fill them (JTSJOL Non-Farm Job Openings minus USCJC US Continuing Jobless Claims - dark blue). Unchanged since May. 3. Unemployment Rate (UNRATE gray) rises as before SPX (yellow) drops. Currently UNRATE is pretty static and close to multi-year lows. 4. The following are static since May: * Initial Jobless Claims (USIJC light blue) * Continuing Jobless Claims (USCJC pink) * Non-farm Payrolls (USNFP green) * Job openings (JTSJOL light purple) 5. After a year in decline, M2 Money Supply is rising again (USM2 dark red). 6. The SPX drop last year was a result of inflation -> rate rises -> fear. But the recession didn't happen and the economy still looks strong? Conclusion is that macro conditions don't foretell a market crash in the immediate future. THIS IS FOR MY OWN RECORDS ONLY. NOT TRADING ADVICE. EVERYTHING CAN CHANGE VERY QUICKLY.
FRED:JTSJOL
by lavoriamo
Inflection Point Alert: Tracking Housing Affordability Through tThe CUSR0000SEHC/M2 ratio serves as a unique lens to evaluate the dynamics between housing costs and the broader monetary environment. This ratio compares the Consumer Price Index for Owners Equivalent Rent of Residences (CUSR0000SEHC) to the M2 Money Supply, providing insights into housing affordability relative to the amount of money in circulation. Key Observations: Declining Ratio Pre-December 2021 - Prior to December 2021, the ratio was on a downward trajectory, suggesting that housing costs were not rising as quickly as the money supply. This could have been indicative of increased housing affordability or a result of loose monetary policy. Inflection Point in December 2021 - A notable change occurs in December 2021, where the ratio starts to rise. This inflection point signals a potential shift in housing affordability, indicating that housing costs may be rising faster than the money supply. Policy and Market Dynamics - The inflection point could be attributed to various factors such as changes in economic or monetary policy, or shifts in market demand and supply for housing. Implications: Economic Policy - Policymakers and investors should pay close attention to this trend as it could have broader implications for economic policy, including interest rates and housing market regulations. Investment Decisions - For traders and investors, this could serve as a leading indicator for sectors sensitive to housing costs and interest rates. Public Awareness - For the general public, understanding this ratio can offer insights into the future trajectory of housing affordability, a key component of the cost of living. Conclusion: The CUSR0000SEHC/M2 ratio offers a nuanced view of the interplay between housing costs and monetary conditions. The recent inflection point warrants further investigation and could be a harbinger of less affordable housing or changes in economic conditions. As such, it serves as a valuable tool for policymakers, investors, and the general public alike.
FRED:CUSR0000SEHC
by StellarTrader2
A yield neutral play against curve inversion The idea is a position that profits from any difference between the 20yr bond ETF ( NASDAQ:TLT ) and NASDAQ:IEF , the 10yr Note ETF. The potential opportunity lies in their identical share price, a rare event. Yield on the 20yr has never been lower than the yield on the 10yr (since 1989). The top chart shows the difference in price . Always above 0. It implies that TLT's share price has always been higher than IEF's (middle chart, excluding 6mo in 2011). Bottom chart is TLT-IEF. Almost always >= zero. This week the price difference was ~zero. A position that profits from any gap between TLT and IEF is a high probability trade. Actionable trade details will depend on the assets used and may include: ETF's NASDAQ:TLT and NASDAQ:IEF TLT calls and IEF puts 20yr treasury bonds (in place of TLT Futures ZB and ZN or their micro-equivalents
FRED:DGS20
by gb50k
INFLATION BUBBLE AT CROSSROAD INFLATION VS DEFLATION Based on the last 120 year of DATA the inflation cycle had peaked . The mistake some will have that it is the beginning of ASSET DEFLATION CYCLE . SEE THE 1921 TIME TO WHICH I STATE we are in based on the 89 2010 4 and 2 year cycles and time spirals which called for a top in sp in sept and late dec 2021 which would see a major new BEAR market in all assets classes to which the panic cycle due oct 4th to th 20th focus on the 10th with targets of 3511/3490 . this is the FIRST leg of the deflationary CRASH cycle NOT the END .
ECONOMICS:USIRYY
by wavetimer
1
China Is The Next JapanIn the 1980's, Japan was the ascendant global power. Year after year, Japan's GDP grew, and it seemed like a foregone conclusion that the country would flip the USA in terms of economic output and political standing (as you can see from the chart above). What happened next? Utter stagnation. Demographic issues and a popping asset bubble led to issues that continue to this day, and the economy has never really been able to get off the ground in the last 30 years: Today, the parallels with China are clear. China is the new ascendant power. However; The country faces a credit crisis, an asset bubble, and demographic shifts that could lead to a massive period of stagnation for the world's second largest economy. Will China fall behind? Combined with other weakening economic data, it seems likely that the Chinese dream is over. Here's the problem; China is an autocracy. People have put up with a lack of freedoms due to the increasing quality of life. What happens if that stops? Thankfully, nobody knows what the future holds. That said, political instability seems likely. As housing continues to worsen, we're worried about exposure to China from a big picture perspective: Individually, the best ways to play this seem like puts on FXI, the largest concentrated Chinese mega cap bet. If the economy stagnates, we expect mega-caps will be hit accordingly: Long puts on big companies like BABA and JD also seem like reasonable trades over the next few years as multiples come in. Cheers! Looking for more high-probability trade ideas? Follow us below. ⬇️⬇️
ECONOMICS:USGDP
by PropNotes
1
Interest rates and bear markets. We all know that rising interest rates mean falling stock prices. It's been repeated endlessly over the last year with people getting up in arms about the stupidity of the market to be rallying with interest rate hikes. To elaborate on this, here's the massive interest rate bubble of the 1970s. From 1975 - 1981 US interest rates would go up a whopping 500%! Here's what SPX did during those years. It doubled! It appears people forecasting a prolonged bear market due to "Higher for longer" did not do their backtesting. This has not historically created a bear market in US stocks - they went up 100% last time rates went up 500%. This is not a bull or bear analysis. I just wanted to let you know. Because the internet told me this was impossible - and clearly it's not. It's not even a good analysis point.
ECONOMICS:USINTR
by holeyprofit
6
30-Year Fixed Rate Mortgage Moving Higher 9% (1M)30-Year Fixed Rate Mortgage Monthly Well I guess I'm glad my mother-in-law's basement isn't a total dungeon.. What's sunlight? I'm familiar with grass because that's eye level when I'm looking out our window. Big brother JP, the head of the Fed, says rates aren't going anywhere any time soon, and we've all heard the fear mongering of 8% mortgages coming. Why would anyone want a house when you can load up on lumber and build a tiny home on your in-laws side lot? Life hack; build one in your parents backyard and you have a vacation home. Well lets all hold hands because the mongerers might be on to something. Chart / RSI / Momentum Rates previously pierced an important level of resistance (Red Solid) back in October and topped out just north of seven percent. Fast forward ten months and we're back retesting the same level, but this time we have a golden cross (Highlighted); a first on this chart. The RSI has also broken back above 70 level, indicating the strength of the trend to continue, and invalidating the previous bearish divergence (Teal Solid). After breaking past a previous level of significant resistance, Momentum has broken past it's previous peak (Teal Dotted) and continued it's trend higher; another indication of a strong trend. What Seems Legit? 30-Year rates crackin' nine percent because everything is signaling us higher. Chart Key Red Solid = Important Level of Resistance / Support Teal Solid = Divergences Teal Dotted = Momentum Level of Resistance Green Box = Resistance / Target Area Highlighter = Golden Cross / RSI 70 Level Break High
FRED:MORTGAGE30USLong
by Seems_Legit_Research
1
long duration treasury bondsThe federal funds rate has never gone up this high and this steep before in history. the worse the conditions become apparent the faster they cut rates. with delayed effects of high funds rate just now showing themselves and markets/ credit contracting. Bonds are due for a guaranteed high rise that can be exited as soon as funds rate hits back to zero. I know nothing is guaranteed, but i feel this is the easiest risk adjusted return of the decade. tmf is 3x leveraged etf.
FRED:FEDFUNDS
by DiscoBlue
1