- A compelling chart sourced from JPM research on Covid.
- On the x-axis is a measure of “collectivism vs. individualism” – a concept developed by Geert Hofstede in 1970s.
- “The individualism vs. collectivism dimension considers the degree to which societies are integrated into groups and their perceived obligations and dependence on groups. Individualism indicates that there is a greater importance placed on attaining personal goals.“
- On the y-axis a measure of Covid infection rates per capita.
- “A standard cluster analysis shows a high degree of significance when thinking about COVID within a collectivism/individualism dimension.“
Macroeconomics
Snippets on the big picture.
US Elections
- Predicting the outcome of US elections is difficult.
- This is a model that is forecasting a 91% chance of a Trump victory.
- The model has a good hit rate – “Mr Norpoth told the outlet that his model, which he curated in 1996, would have correctly predicted the outcome for 25 of the 27 elections since 1912, when primaries were introduced.“
- It is also dismissive of early polls, which currently give Biden a 9 percentage point lead, as seen in this chart – “The terrain of presidential contests is littered with nominees who saw a poll lead in the spring turn to dust in the fall. The list is long and discouraging for early frontrunners.“
Consumers and Covid-19
- The Cleveland Fed has been maintaining a survey of consumers for their views on how they are responding to COVID-19.
- “Consumers continue to see a long road ahead, with nearly two-thirds expecting that the coronavirus outbreak will last either one or two years …
- However, we are starting to see some changes in behavior, as fewer consumers report storing more food supplies than had been the case earlier …
- And the impact of the coronavirus on GDP over the next twelve months looks to be decreasing in size, from -20% in late March to -10% in late April and -5% in late May.”
Covid-19 JPM Research
- Thorough and useful set of research notes from JPM Asset Management on Covid-19.
- It includes economic tracking using real time credit/debit data, latest US infection tracking, update on drugs and vaccines, testing, impact on the markets, analysis of mortality, and loads more.
- The chart shows how US high frequency economic variables are tracking.
ESG Funds and the Department of Labor
- The Department of Labor (DOL) has proposed a rule that might ban the ability of corporate sponsored retirement accounts (e.g. 401(k)s) from holding ESG Funds.
- “Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan,” said Secretary of Labor Eugene Scalia. “Rather, ERISA plans should be managed with unwavering focus on a single, very important social goal: providing for the retirement security of American workers.”
- 401(k)s alone hold $5.6 trn AuM.
UK Housing
- A data rich post about UK housing with some gloomy predictions.
- Pictured is a chart of mortgage approvals – in blue since the three years leading up to the financial crisis and red since the three years before lockdown.
- Mortgage approvals are “the leading indicator” for housing transactions and it does not bode well.
UK Market Valuation
- The UK stock market is very cheap relative to the world no matter how you cut it.
Central Banks and Bond Markets
- Chart depicting how much of the outstanding domestic bond market of major economies is currently owned by the central bank itself.
- Japan is a clear stand out, while others are catching up.
US Leveraged Loans Market
- Fascinating to see the change in market participants away from banks.
Zombie companies
- Low rates have spawned a growing army of zombie companies.
- This chart from DB shows companies where debt service payments exceed profits. These now make up nearly 20% of firms.
Foursquare Recovery Index
- Forsquare (covered here before) continues to be a great source of data to track the recovery.
- Recently this has been put together into a handy Recovery Index.
- The methodology and premise are described here.
EU Recovery Fund by Country
- Allocation of the EU €750bn recovery fund by country as a % of GDP.
- Source.
Sewage Covid Concentrations
Gundlach Latest Slides
- Always worth a flick through the latest presentation – titled Superman – from Jeffery Gundlach.
- This is an interesting slide showing that twin deficits (current account and budget) lead the US Dollar exchange rate by 2 years – suggesting downward pressure on the latter.
Predicting Interest Rates
- The solid line depicts the actual path of 10-year rates.
- Dotted lines are predictions by market participants in a Fed survey.
- For 20 years there has been a consistent forecast of higher rates that has not materialised.
- Source.
Assets and Inflation
- Interesting chart showing the percent of time (y-axis) various asset classes outperform inflation over a given time horizon (x-axis).
- Equities come out on top.
- Gold and Commodities, the usual hedges, actually don’t perform that well.
Debt and Crises
- This chart shows government debt to GDP of the G7 countries.
- It has been rising steadily and could close in on a record.
- Charted against this is the percentage of countries that have seen a financial shock over any 12 month period.
- Interesting to see that financial crises are more frequent in the post-Bretton Woods era, which coincided with rising debt.
Fiscal and Monetary Stimulus
UK Housing Market
- April Zoopla report is worth a read.
- This chart shows the bounce back in demand, with sales agreed likely to follow given pent up demand.
- Interestingly two coastal cities saw the biggest increase, while London is still down as demand shifts elsewhere.
It is always V-shaped?
- Interesting chart from MS that suggests that in the post-war period recoveries have tended to be V-shaped.
- The latest fund manager survey from Bank of America shows just 10% of respondents expect this.
