- Global PMI heat map starting to bottom out.
Macroeconomics
Snippets on the big picture.
Very Long Term Real Rates
- Bank of England have done a big long term study of real interest rates.
- Paints a picture of ‘suprasecular‘ decline.
- “Against their long‑term context, currently depressed sovereign real rates are in fact converging ‘back to historical trend’ — a trend that makes narratives about a ‘secular stagnation’ environment entirely misleading, and suggests that — irrespective of particular monetary and fiscal responses — real rates could soon enter permanently negative territory.“
Economic Expansions
- This is a chart from JPM 2020 Outlook of post-war economic expansions.
- The thing not to forget about the current (Q4 07) expansion, which is running into a record 126 months, is how shallow it is vs. others.
S&P Stocks by Use of Capital
- Interesting chart showing the performance of three buckets of S&P 500 based on their use of capital since December 2017.
- Suggests the stock market hasn’t rewarded reinvestment.
RICS Survey for UK
- December post-election RICS survey was rather positive.
- JPM write via Alphaville – The RICS survey, which was post election, “showed a marked and regionally broad-based improvement in its forward looking questions,” says JP Morgan Cazenove. “The expected prices balance leapt from 1 to 23, expected sales shot up from 13 to 31 and new buyer enquiries surged from -5 to 17. These are comfortably the highest levels reported since before the referendum and, in one reading, have swung from below to above their long-run averages.”
- Full charts in the link.
Health and Education
- Rather staggering growth in the % of the US economy dedicated to healthcare and education.
- These two activities account for 15% of jobs.
Bear Markets
- Nice table showing all the US stock bear markets since 1929.
- 11 without economic recessions and 17, more severe bear markets, with recessions.
Valuation
- On every measure valuation in the US Stock market is towards to top of historic ranges.
- The stand out is Free Cash Flow yield.
- However, as we saw here, capital spending has reset structurally lower which explains this discrepancy.
Capital Spending
- Capital expenditure in the US looks to have moved structurally lower (as a % of cash flow) in the early 2000s and remains so to this day.
US Imbalances pt 2.
- Discretionary Spending as % of GDP for this expansion is still below historic average.
US Imbalances pt 1
- New home sales data shows little exuberance.
US Payrolls
- Another way to visualise the length of the recent expansion – number of months of consecutive positive payrolls.
Iran
- We have written before about Iran here.
- This is a really interesting article on Operation Ajax.
- It involves the 1953 overthrow of a democratically elected prime minister in Iran by the US and UK.
Equities and PMI
- Equities often continue to rise after a major bottom in global PMIs.
Magnus on China
- George Magnus long article on China in 2020 and beyond.
- “China is certain to experience slower economic growth in the years ahead, but the bigger surprise may be that, in US dollar terms, this narrative could be a factoid because of a fault-line that leads to a precipitous fall in the Yuan.“
Hedge Fund Gross
- Hedge fund gross exposure is at 2 year highs.
Causes of US Recessions
- Great table from GS Research showing the main causes of US Recessions since World War I.
- “A review of the last century of US recessions highlights five major causes: industrial shocks and inventory imbalances; oil shocks; inflationary overheating that leads to aggressive rate hikes; financial imbalances and asset price crashes; and fiscal tightening.”
Driving Less
- Miles driven used to match economic growth but this started to diverge since the 1990s in the US.
Household Debt
- US household debt burden is at very low levels.
Household Wealth
- US household wealth is at record levels up 50% since the last peak.
