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The Daily Shot: 09-Jan-18

• The United States

• The Eurozone

• China

• Emerging Markets

• Bitcoin

• Commodities

• Equity Markets

• Alternatives

• Credit

• Rates

• Global Developments

• Food for Thought





The United States

1. Let's begin with the consumer credit report which showed that Americans are embracing debt once again. Consumer credit balances saw the greatest monthly increase in 16 years.

• Total consumer debt outstanding hit 26% of household disposable income for the first time.

• On average, US consumers are living beyond their means, as spending exceeds income. The wealth effect (houses, stocks) is offsetting this trend for some households, but not for all.

Source: Piper Jaffray

• A sizeable portion of this increase in consumer debt has been funded by credit unions, which made a big push into the sector after the recession.

• Student debt, which is funded by the government, is approaching $1.5 trillion.

It is by far the largest financial asset held on the federal government's balance sheet.

Source: @LoganMohtashami

2. There is a widening gap between consumer sentiment and the savings rate. In the past, this divergence was a precursor to the end of the economic cycle.

Source: Piper Jaffray

Similarly, the disappearance of the output gap also indicates that we are in the late stage of the cycle.

Source: Market Ethos, Richardson GMP


3. Here is how the US corporate tax rate compares to other large economies since the new tax bill went into effect.

Source: BMO Wealth Management







The Eurozone

1. The euro area sentiment indicators continue to climb, exceeding economists' forecasts.


• Investor sentiment:

• Economic confidence:

• Business climate index (an all-time high):

2. Retail sales rebounded in November.

3. Germany's factory orders remain near record levels.

Source: Statistisches Bundesamt

4. Long-term hiring in France spikes as the labor markets improve.

Source: @fwred, @Denis_Ferrand







China

1. China's FX reserves are grinding higher. Beijing has been able to plug some of the currency control "leaks." Moreover, the fears of a major yuan devaluation have receded, reducing the need to move savings into dollars.

2. Economists anticipate a weaker economic growth this year, as fixed asset investment slows. Elevated interest rates are taking their toll on the property markets.

Source: BMI Research

3. Despite an ongoing manufacturing expansion, factory jobs are contracting (PMI < 50).

Source: BMI Research

4. Is China ready to fully open its economy to foreign investment? This chart compares the EU's direct investment in China to China's direct investment in the EU.

Source: @bpolitics; Read full article

5. Electric vehicle demand continues to climb.

Source: @andypeaps, @anjani_trivedi; Read full article







Emerging Markets

1. Chile's trade surplus hit the highest level since 2014 as copper exports spike.

The nation's core CPI remains benign.

Chile's stock market has recovered from the election uncertainty.

2. Brazil's industrial production beat expectations.

3. Venezuela's 10yr international bond price dips below 20 cents on the dollar.

4. Romania's central bank unexpectedly hiked rates for the first time in a decade amid rising inflation.

Source: @markets; Read full article

5. Oman will be the first EM country issuing debt this year to help plug a $7.8bn budget deficit hole. Will the rating agencies downgrade Oman to junk?

Source: Barclays, @tracyalloway







Bitcoin

1. Bitcoin appears to be range-bound, unable to breach the $17k level again.

2. Ripple took a massive hit on Monday before recovering partially.







Commodities

1. Zinc hit a multi-year high.

2. Iron ore prices in China are climbing again.

May-2018 Contract

3. US lean hog futures staged an impressive recovery since August.

4. US grains are struggling again. Here is corn.







Equity Markets

1. Semiconductor shares continue to outperform as NVIDIA rips higher.

Source: CBS News; Read full article

2. Biotech and healthcare stocks slumped on Monday, further underperforming benchmarks.

3. Corporate America is increasingly optimistic about earnings.

Source: @LizAnnSonders, @Bloomberg, @biancoresearch

• Expectations for the Q4 results point to a strong reporting season.

Source: Credit Suisse

• The new tax bill should push earnings revisions sharply higher.

Source: Credit Suisse

4. This year's market rally has already exceeded analysts' projections for the full year.

Source: @TheStalwart, @LJKawa; Read full article

5. The TD Ameritrade retail investor sentiment index is at record highs.

Source: TD Ameritrade

6. How many times did VIX close below 10 during each year since 1990?

Source: @WSJ; Read full article







Alternatives

1. Cannabis startup VC deals hit a new high in 2017 (no pun intended).

Source: @axios; Read full article

2. Here is the breakdown of the 2017 VC deals globally.

Source: @Preqin

3. Private debt fundraising keeps climbing.

Source: @Preqin; Read full article

4. Private equity dry powder hits a trillion dollars. It's not clear how this capital will be deployed given current valuations. Investors will need to taper their return expectations significantly, especially with the leverage interest deductibility sharply curtailed by the new tax law.

Source: @Preqin; Read full article







Credit

High-yield credit default swap spreads (CDX) dip below 300bps for the first time in years.







Rates

1. How do the various income asset classes correlate to Treasuries?

Source: BMO Wealth Management

2. Despite the Fed's ongoing rate hikes, US financial conditions (blue) continue to ease. Something has to give.







Global Developments

1. The implied volatility across major currencies is at the lowest level since 2014.

2. This chart shows which economies will see the fastest and the slowest growth this year.

Source: @mc_economist, @TheEconomist; Read full article







Food for Thought

1. Confidence in the justice system by country.

Source: @OECD; Read full article

2. A map of average credit scores and household incomes by state.

Source: @howmuch_net; Read full article

3. Is your income keeping up with the cost of living?

Source: @pewresearch; Read full article

4. US migrants with the temporary protected status.

Source: @PostGraphics; Read full article

5. The rise of the independent voter.

Source: Gallup; Read full article

6. Road quality by state.

Source: Deutsche Bank, @bySamRo

7. Landline phones.

Source: @FactTank, @StatistaCharts; Read full article

8. Fathers living apart from their children.

Source: @kim_c_parker; Read full article

9. Translating probabilistic language into probability distributions.

Source: @simongerman600; Read full article

The Daily Shot provides objective and disinterested analysis and commentary regarding macroeconomic and market trends. Other than indirectly through country or sector specific exchange-traded or mutual funds, the author of the Daily Shot does not have any interest in or own any of the individual securities which may be mentioned. The Daily Shot does not provide investment advice or any recommendations regarding particular securities. Nothing in the Daily Shot should be relied upon in making an investment decision, nor considered to be a solicitation to offer or buy any securities.