Our Dashboard displays various economic and market datasets at a glance to help you monitor the momentum, trends and possible inflection points near extreme levels as well as anomalies.
In the Macrosection, you will find all US and European leading indicators from the business and consumer perspective, which are helpful to identify the likely direction of growth and inflation, enabling you to better anticipate interest rates market movements and with that other market chain reactions.
In the Technicalssection, we provide a price action monitor, credit and some volatility tools to visualise the sentiment, momentum and trends, which may alert you to extreme optimism / pessimism / overcrowded positioning.
We are sure this dashboard will supplement your market strategies. Let’s “connect the dots” !
MACRO
Economic Sentiment & Cycles
GLOBAL
Global Economic Surprise Indices Heatmap & Graphs
Global 2Y + 10Y Govt Bonds + Yieldcurves
Global CPI heatmap & charts 36 regions
Global Central Bank Rates (28 DM vs EM regions, 3yrs hike/cut cycle table overview)
Global Central Banks balance sheet
Global Manufacturing Confidence (39 regions Heatmap, Breadth, Cycle/Mkt Correlation)
Global Services Confidence (15 regions Heatmap)
REGIONS
USA
US Macro Model, leading indicators heatmap
US CPI proxy model
US Treasuries Cash Yield Curves vs Recessions (2s5s,2s10s,5s30s,10Y-3M)
US CESI vs US10Y Bond correlation
US Employment Situation (Jobless claims, JOLTS)
US Consumer Confidence
Fed’s “Fair Value” FF model
Implied STIR FF probabilities
FOMC “dot-plot” table
US Yield Curve Cycles
EUROZONE
EZ Macro Model, leading indicators heatmap
EU ESI heatmap, Momentum & Trend Scoreboard, Graphs
German IFO & sub components
EU & DE ZEW table and cycles vs EURUSD, 10Y Bunds, STOXX
TECHNICALS
FICC – Fixed Income, Currencies, Commodities and Equities Section
Fixed Income
STIR Term Structures (Fed, ECB, BoE)
Global 2,5,10,30Y Govt Bonds Yield Momentum Monitor (levels, 1wk, 1M)
* this is not a trade recommendation and for educational purpose only. please do your own research.
Keep calm and carry on?
“This famous slogan on a motivational poster was produced by the government of the UK in 1939 in preparation for WW2 and intended to raise the morale of the British public, threatened with widely predicted mass air attacks on major cities.”
Nowadays, it is often used as a meme and in this blog, there are plenty of examples to address it.
Part 1 – UK
The First 100 days often refer to the beginning of a leading politician’s term in office.
This was coined when US President Franklin D. Roosevelt came to office in 1933, at the height of the infamous Great Depression, to signal his intention to move with unprecedented speed to address the enormous problems facing the nation. Since then, not only US presidents, but global leaders, politicians, and even CEOs of major corporations are often measured by this benchmark.
We all remember how UK Prime Minister Boris Johnson was ousted which led to the Tory’s party internal race for leadership ending with Liz Truss to become the next Prime Minister on September 6th.
Barely 38 days into her tenor and the chaos continues as she sacked her Chancellor (Finance Minister) Kwarteng.
Well, to be frank, it has been chaotic ever since the EU referendum in 2016: 6 Finance Ministers and 3 Prime Ministers, a cool 2:1 ratio … and counting !
PM Cameron initiated the referendum and resigned afterward. Theresa May, who voted to remain was chosen by her party to become the next PM. A loss in confidence led to a snap general election, resulting in a hung parliament. She also had to go through 2 votes of no confidence and later resigned in 2019. Boris Johnson was then elected internally but was also forced to call a snap election which he won. Controversies during the pandemic led to a mass resignation of ministers and he eventually resigned in July 2022, left the office on 6 September after the internal leadership election took place. And, for now, the PM is Liz Truss, who by the way called for the abolition of the monarchy and also voted to “Remain”.
The revolving doors have even seen six Finance Ministers over the same period of time just 6 years! Hammond, Javid (lasted 6+ months), Sunak (competed later with Truss for PM + leadership), Zahawi (lasted 2 months), Kwarteng (38 days) and now Jeremy Hunt.
There are only two groups that ultimately lead to decisions which either the opposition or even the own party members take leverage from:
The public – voting with their feet (currently the “cost-of-living-crisis”)
The market (investors and speculators) – voting with the sell button.
So, while the crisis is ongoing for a long time, escalating with inflation spiking to 10%, and energy bills tripling, the so-called “mini-budget” was probably the tipping point and will in my opinion eventually lead to another snap general elections sooner rather than later.
A massive fiscal budget of £200bln+ isn’t just a brain child of one person (e.g. the Chancellor), it is derived by a group, led and appraised by the Prime Minister. The refusal to allow the Office for Budget Responsibility to assess the economic impact of the budget and provide a forecast is another questionable decision.
The market hates uncertainty, and the vote was clear = sell bonds, asking for a higher return for higher risk, and sell the British pound for an initially weaker economy higher government deficit. And vice versa, a slumping currency leads to even more imported inflation, leading to higher interest rates.
If that wasn’t bad enough, the rising yield started a chain reaction, the UK Gilt bond market went into a tailspin, led to UK pension fund margin calls as they operated with LDI and were forced to sell more bonds, leading to higher rates creating the perfect storm. The Bank of England had to step in, and started an emergency buy program, and the UK mortgage lenders withdrew a large chunk of their product.
The current situation regarding “Keep calm and carry on”? = More conservative party members may not have enough confidence in PM Truss, the opposition naturally doesn’t have that anyway, the public is even angrier and now the market has spoken. That was the tipping point and her days as PM are numbered.
High uncertainty = high volatility.
Chaos perfection.
Current market situation:
Inflation sky-high
SONIA curve is super steep
Bond yields catching SONIA rates
BoE is more hawkish and catching up with the market
The rate of change in bond yields creates huge uncertainty, much higher refinancing costs
LDI theme will be scrutinised further and probably result in reforms
BoE will not be able to put an ultimatum on UK pension funds to “sort out the mess” and will easily be forced to buy more long-dated gilts = an indirect emergency QE program while in a very hawkish hike cycle.
Bonds are in a bear market, depending on the fiscal budget, but technically show “exhaustion signals”
GBP remains in a bear market trend as well, creating more inflation via expensive imports. Only the diverging UK-US yield spread is pointing to a possible further rebound of the Pound.
Part 2 – GERMANY
“Keep calm and carry on” or “Bleib ruhig und mach weiter” ?
Carry on with the Green party doctrine or adjust to cheaper energy via nuclear power? Robert Habeck, party leader, Minister for economic affairs and climate action and vice Chancellor (Prime Minister) of Germany held an emotional speech with a narrative “Nuclear power and fossil fuels brought us here. They caused this crisis, they are not the solution” – and got a standing ovation. Of course. From the party. What else to expect?
It was Chancellor Gerhard Schroder SPD-Green coalition who initiated to phase out nuclear power and made Germany so dependent on Russian energy supply, in case someone has forgotten this.
Clean energy is a nice thing to have, but solar and wind power alone will never be enough to compensate for demand. After a group of then EU-countries, led by France, tried to convince the European Commission to recognise nuclear power as low-carbon source, Germany / Habeck hit out to label nuclear and gas “green”.
Well, France still has nuclear power stations and the inflation is 5.6%, Germany’s energy crisis deepened after Russian’s invasion of Ukraine and the resulting sanctions, Germany’s inflation stands at 10%. Oops.
FFS, even Greta Thunberg “u-turned” ! From “False solutions” tweet in July to a recent interview with well-known ARD journalist Maischberger “If we have them, it’s a mistake to close them in order to focus on coal”. Which actually made me chuckle… yes, Greta, the poster child for Climate Change, a teenager who skips school every Friday for her protest, has no electrical engineering or science degree is the one to ask.
The interest rate landscape in Germany is still relatively low, compared to other countries, but rates have been rising too, and very fast indeed. ECB’s QE program has ended, and even though there is this new “quasi QE for some” in place, it also raises the same question as everywhere else: what about refinancing risks? The property market and set up in Germany is very different from e.g. UK or US. In Germany, there is no such “climbing the property ladder”, which is partly driven by speculation as house prices go up, homeowners sell with profit, and buy a bigger home with a larger mortgage. The typical German home buyer is there for a long term, probably until old age, and gives the house as an inherence to the children.
Here in the UK, a lot of people take interest-rate-only mortgages with a tenor of 2 years, hoping to catch the price rally and move on. This now creates a huge problem: many hardly pay back their mortgage, and will be forced to refinance now or in the next months with much higher rates. In Germany, the typical mortgage is accompanied by a larger deposit/equity, 2-4% annual mortgage repayments, and a much longer duration, e.g. 10 years. If there is a housing bubble and problem in Germany (e.g. Munich, Hamburg…), it’s mostly driven by international speculators.
Current market situation:
Inflation sky-high, especially in Netherlands and Baltic countries in the Eurozone
EURIBOR curve is only relatively steep
Bond yields catching EURIBOR rates
ECB is more hawkish and catching up with the market
The rate of change in bond yields creates uncertainty, higher refinancing costs
Peripheral countries are on the radar again (Greece, Italy etc)
Bonds remain in a bear market for now
EUR remains in a bear market trend as well, creating more inflation via expensive imports. Only the diverging EU-US yield spread is pointing to a possible further rebound of the EURO.
Part 3 – USA
“Keep calm and carry on” – or, how tight will the market accept until they scream STOP!
The chart below shows 3months loans on a forward basis, FRA (Forward Rate Agreements), and it really is astonishing how fast the rates have gone up. Every DCF modeler is scratching their head about how often they have to adjust their data. IMHO, we already have reached a questionable height and speed while the Fed continues to hike. Nobody here can seriously keep calm and carry on as usual. This will end in tears.
While bond and loan issuers continue to hold their breath with rising yields and rising spreads, for bond investors it has started to create interest (see dashboard charts of Corporate bond yields/spreads).
But, the US housing market remains under pressure and the first chart reflects the problem: US mortgage loans near 7%, not only more than doubled from post CV19 shock (naturally with so low rates), but they are also much higher than pre CV19. Purchase price affordability dropped like a stone.
That causes obviously selling pressure, higher inventory, and longer listing times, but there is a seasonality effect as well (at least shown here for the previous 3 years). Redfin is doing a great job here with publishing these charts, unfortunately only for 2020, 2021, and 2022. CV19 year is an extremely low base and 2021 as a follow-up year where every asset rallied to the moon, isn’t representative either. Would be nice to see those lines for the last 10 years.
Anyhow, it’s not rocket science to predict a slowing housing market (or worse), but as house prices and rents are coming off, this is relevant for the 32% weight in the CPI basket (= shelter).
Current market situation:
“Inflation has peaked” is a wrong narrative. The rate of change may have peaked, but the basket of goods and services is yet again +8.2% higher than same time last year, Core CPI was actually higher than expected 6.6% . Or in other words headline inflation is 4x higher and core inflation 3x higher than Fed’s wishful magical 2% target.
FF, SOFR and LIBOR curves are still steep coming into next year in anticipation of a very hawkish Fed
Bond yields chasing STIR rates and have NOT rolled over or rolled through
FED remains very hawkish and is still catching up with the market
The rate of change in bond yields creates uncertainty, higher refinancing costs
US housing market on high alert
Bonds remain in a bear market for now, though show “exhaustion” signals. Every nibble to get long in small risk has been either a day trade or a slap in the face.
US$ Index DXY remains in a bull market trend, creating more problems for e.g. US$ funding emerging countries.
The elephant stays in the room.
NFP was relatively strong, the unemployment rate back to 3.5%, jobless claims relatively low = tight labour market.
PPI stays relatively high, but it was yet again the CPI last Thursday back in the spotlight. Headline slightly higher than expected, but lower vs last month, core CPI however made a new high at 6.6% = inflation remains sticky.
The combination is pretty clear = Fed has no reason to slow down, let alone pause. Another +75bp for the next meeting was immediately priced in nearly 100%, and another +75bp 70% chance for the December meeting.
The result intraday Thursday was surprising though: while yields went up, bonds fell, yield curves bear-flattening, and stocks nosedived… all as one would expect after the CPI. However, it was the sharp rebound of stocks that surprised me, e.g. Nasdaq rallied 6% off the low on that day. Some excused, it was the 50% CV19 low-2021 peak retracement in SPX and 61.8% fibonacci for Nasdaq. Others argue, gamma hedging goes both ways and resulted in a massive short squeeze.
Whatever that was, volatility is the trader’s best friend and portfolio manager’s worst enemy.
Is there a techncial bear market rally on the cards now ? Sure.
Is this already the final bear market bottom ? Most likely not at all.
RoW / Global
Global Transport from China
I have read an interesting article from my FinTwit friend Uresh and wanted to add a bit more colour because one of the main charts from him was the Xenata Shipping Indices from Far East to North Europe and US West Coast.
The lockdown, the insane money supply, then the re-opening, the global supply chain disruption all caused the enormous inflation spike. Visualised in the chart below, e.g. shipping costs absolutely exploded, but have fallen sharply, but are still higher than pre CV19 shock.
This raises the question:
Are they coming down due to improved imbalance or are they crashing due to potential global recession due to too hawkish central banks, and too high interest rates ? The ultra strength of the US$ certainly intensified e.g. emerging market countries, who embarked on cheap US$ loans expansion and now facing a dilemma.
Meanwhile, the US yield curve signals a potential US recession, and as the sample of some countries’ FX reserves table below shows, the top 5 countries with the most declines (China, Japan, Singapore, India, Russia) have an aggregated $720bln drop. Selling US$ to support their own weak currency ? Selling US Treasuries as well ?
Credit Suisse
“Keep calm and carry on” ? – errr, nope. But it’s a bear case since years.
I have a mini long term thread running on Twitter, when $CS started to make some headlines.
The CDS curve has inverted since, but so far spread widening is at a moderate pace, no panic. Default probability 1Y rose from 3% to now 9%, 5Y is up to 27%. If something would be dangerously / imminent, CDS would trade north of 3000-4000bp and 5Y closed around 375bp.
The share price is in a bear market since… 2009 GFC.
However, the latest story of the Fed providing a $6.5bln swap facility (via SNB to CS?) raised further concern. On the chart below is the debt maturity profile of CS, and in 2022 $10.8bln are maturing. Was this one reason for the emergency swap ? As almost all banks prefer to borrow shorter maturities, CS isn’t alone and $41bln are set to expire next year 2023. Now, this is substantial, but also old news, everyone is aware of the share price pace since years, aware of the debt profile and CS is literally a restructuring, reorganisation case since years.
Bail-out, asset sales will continue to be on the agenda. A Lehman 2.0 default is highly questionable, so this is probably not a black swan event then.
The most risky part of the bond capital structure are the perpetual bonds, and the chart below shows how they have performed recently. Of course sell-off, in line with wider spreads, tanking share price, and also an illiquid market for perps.
TECHNICALS
Precious Metals
Quite a big move last week in Silver (-9%) and Palladium (-8%), while Gold fell too.
This year really is a “cash is king” year, stocks are in a bear market, bonds are in a bear market, no save haven bids or theme, even precious metals are in a bear market. The miners don’t only suffer from the underlying assets, their operating / funding costs deteriorate too as interest rates shot up.
* this is not a trade recommendation and for educational purpose only. please do your own research.
Inflection Point
The whole financial world is looking at the Fed, the US$, the US interest rates, and the US stock market. That’s old news. Correlations are very high, if US bonds move in either direction, so do most of the other global bonds. If the NDX or SPX moves up or down, so do most global local indices in tandem.
The question everyone is asking: was June the bottom of the correction or are we still in a bear market rally ?
In June, markets were clearly very oversold, everyone “and his barber” was short or flat and sentiment was literally 0. Typically, this was followed by short covering, some bargain hunting, CTA systematic momentum trend followers, corporate buyback programs, gamma short squeeze, it was all there.
Let’s take a quick look at how cross-asset global markets were 14 June 2022 (the then US yield peak): here is the old version of my overview with momentum, trend, and exhaustion scores separated: technically a rebound/retracement had the best odds. Bonds, stocks, credits oversold, crude oil/ energy sector overbought.
And here is the same overview for last Friday 14 August 2022, two months later: certainly an interesting reversal and rotation since mid-June, and while momentum is obviously very strong (short-term indicators), the trend is now flat (of course, because prices reverted to the long term mean).
As usual, risk-on or risk-off is near correlation 1.
VIX implied volatility coming off sharply, went from backwardation to normal contango curve, “leading” the risk-on-rally across assets. Bond yields and credit spreads reversed too, cyclical vs defensive sector rotation, growth vs value as yields got lower. So, it’s all the same trade.
S&P500 vs various indicators, US$, relative value pairs:
So far, so good. Previous blogs always mentioned the rebound, the “bear-market-rally”.
And now, we are at this inflection point.
Bulls vs bears.
I have the impression, 50% of the market is currently still underlying bearish (“hey, stocks now back to mean, touching the down-sloping long term trendlines and moving averages, and yield curve is extremely inverted, ISM keeps falling, Fed not done etc”) and the other 50% are bullish, because they are always bullish.
One reason could be they are different generations.
I wouldn’t be surprised if there was a survey of bull/bear in age groups, it would skew towards bearish with traders/investors experience since 1990s, having gone through Asian crisis, dot-com bubble and burst, housing bubble and burst, Eu debt crisis and bailout. True bear markets. After excessive risk taking, a very aggressive Fed to “cool down and trying to soft-land the economy”, then reversed to aggressive rate cuts as recession kicks in. Over and over and over again. The CV19 global lockdown was a different kind of beast, unprecedented and a shock, resulting in the gigantic fiscal and monetary rescue policies, but that was not a bear market, that was a market crash. Very different actions, reactions, risk management. But that’s why there is this old saying: “there are bold traders and old traders, but no bold old traders”. They all learned their lessons, tried all tools, but experienced all different upswing and downswing economic and market cycles.
Where I have the impression, the post-GFC generation, a new breed of traders grown up only with the fast internet and trading platforms, leveraged accounts to hop into call options, can move markets wilder with today’s retail aggregated size and the resulting gamma squeezes. That generation either had zero or low interest rates for a very long time, and if there was some market panic (2018, 2020) the Fed reversed gear, stopped QT, started cut cycle and QE again or the latest emergency package.
Anyone actively trading since June 2009 never experienced a true bear market which lasted years. So, of course, they tend to be perma-bullish. There is simply no reason for a bear market. Small corrections (excluding the unprecedented CV19 shock, where the stock market immediately found the bottom, so, by nature they grew up BTFD syndrome.
The stock market is a leading indicator, and apparently everything is always already priced in.
Really ? Was everything priced in the stock market in 1998 ? 1999 ? 2006 ? 2007 ? So, now, the market has priced in the Fed hiking and to what level, priced in the QT program, priced in rising jobless claims, falling inflation, sanctions on Russia, energy crisis in Europe. And that’s that. June S&P500 low supposed to be the bottom and now to the moon.
How often did inverted yield curves signal recession within 12-18 months ?
For how long was a very restrictive monetary policy supportive for the stock market ?
How long did an overheated low unemployment rate last before reversal and recession started ?
How long can the business and consumer really work well-oiled with high interest rates given todays debt sizes ?
Why are longer term bond yields trading through shorter term ? Inflation vs growth outlook improving ?
How often did the stock market ignored underlying problems and kept going up ?
Time will tell, if this time it will finally be different !
For now, I will stay with my opinion: stock market rally may continue, I certainly never ignore momentum and strength, but I also believe, there will be a time for long term investors to pick up stocks a lot cheaper.
The only thing what’s missing right now is a catalyst. 9/11 2001 wasn’t the reason for the 2000-2003 bear market, that sad event was one of a few catalysts. Lehman default Sep2008 was not the reason for the 2007-2009 bear market, but huge catalysts on top. The downturn so far was due to re-opening mismanagement bottlenecks, global supply chain disruption, very high inflation, gigantic money supply, and extremely high energy prices. There will be a catalyst in 2023 which is not known yet. China ? Taiwan ? Something else ? I wouldn’t be surprised with the current situation and long lasting problems, the stock market will see a proper better valuation in 2023 or 2024. I wish I have a crystal ball.
Are we honestly back again to FOMO ?
MACRO
US
The Good, The Bad and The Ugly…
Inflation peaked, NFIB small uptick, UoM (flash) rebound
Inflation is still extremely high, jobless claims going up, Fed continues to hike + QT
The inverted yield curves, still ultra low consumer confidence
The two data points (literally the whole world) everyone is watching: US inflation and employment reports.
At last ! Inflation has peaked ! This was not only a short term relief for the market (even slightly lower than the lower expected number), but certainly for the lagging-reacting economists and policy makers at the Fed. Some components like used cars already dropped like a stone since months, but shelter remains another factor. But overall all leading indicators have been screaming lower CPI print for a while. The recent gap is highly unusual and calls for an anomaly. Business surveys and commodities pointing to an average of ~3.0%. And as PPI falls, so does CPI, and then PCE. It’s written on every wall…
The other data “dependency” point of the dual mandate – the employment situation – is more of a mixed bag. NFP was strong, although, with a very high number of part-time workers, the unemployment rate moved to a new low 3.5%, which remains a sign of overheating. But these are lagging indicators, ISM/NMI surveys show the weakening trend, and jobless claims are slowly going up for months now.
Together, this leaves my own interpretation of the not-working-Taylor-rule at a fair value of ~3.5% Fed Funds rate. STIR FF curve moved slightly less aggressive for the next FOMC meeting in September after the better-than-expected CPI report, but clearly is pricing in a lot more hikes, restrictions, plus the QT, which they may or may not even increase.
EUROPE
On top of the existing and very harsh energy crisis, importing fewer NatGas or Oil from Russia due to the sanctions comes the heatwave and drought. The Rhine is one of the most important rivers to transport goods (including coal) through Europe. Shallow rivers make it difficult for barges and there are estimates 400,000 barrels a day of oil products could be disrupted, Uniper has warned it may cut output at two key coal-fired power plants in Germany. (The left pic seen via @SStapczynski on Twitter).
In other words, “the German Green party famously fighting to switch off nuclear power plants are now finding out the alternative is dirty coal power plants can’t be supplied the coal shipped by barges via the Rhine due to low river levels. ( via @MichaelAArouet) .
The heatwave and drought obviously isn’t just risky to have wildfires, but it could damage wheat, rapeseed, maize crop in Europe. As if the Ukraine “Europe’s bread basket” disruption wasn’t enough.
That makes you wonder, when does the recession start and how deep and how long will that last?
Central Banks action
Thailand finally joined the hike cycle, BoT raised +25bp to 0.75%. Amazingly, CPI is at 7.6%
Mexico hiked for the 10th time, another +75bp to 8.50%. That’s a total of +450bp since the start, Current CPI stands at 8.15%
TECHNICALS
“Watch every tick, trade like a d*ck”.
Every data release creates a lot of noise, it’s an algo party and mostly, there is one winner: the broker getting commission. Either you have the correct position beforehand, otherwise, trading the data vs algos is impossible, the trading gaps are so fast and so large, manual trading against this is pure speculation and adrenaline push.
Here a good example since the last FOMC, including Powell presser, GDP, ISM, NMI, NFP, CPI reports.
RATES
US
The US yield curves (2s5s, 2s10s etc) are still heavily inverted, we all know what historically that means. While there is always room to go (“records are there to be broken!”), it is getting tough. IMHO, the deeper the inversion, the higher the chance of a bad recession 2023.
The US yield curves (2s5s, 2s10s etc) are still heavily inverted, we all know what historically that means. While there is always room to go (“records are there to be broken!”), it is getting tough
Credit Market Bond ETF
Oversold, risk-on, revert to mean and now at inflection points.
FX
Quick overview of main themes, Risk-on or off, commodities-driven etc.
CREDIT and VOLA gauges
After market being so oversold and peak vola:
VIX from backwardation in June to currently in steep contango:
STOCKS
Oversold markets, risk-on, revert to mean and now at inflection points…
GLOBAL CROSS ASSET PERFORMANCE TABLES
performance snapshot wk32
weekly performance snapshot wk32
14 June 2022-to-date (US10Y yld peak) performance snapshot wk32
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