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Your Quiver | Tuesday, April 18, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

Flow Check

One of our brokers is seeing 55/45 better to buy with factor flows showing a risk-on profile (think cyclicals, banks, platinum, China tech) with the biggest sell flows in defensive yield plays. Value is more neutral, with Long Only accounts in sell mode there.

Volume Check

Volumes are down a lot this month. Gauges of volatility, like “miles driven,” are down. The VIX is below 17. Investors are buying dips and covering shorts. What could go wrong?

Tech Check

In late April we’ll start hearing from tech companies during this earnings season. Remember, they drove much of the rally this year, keeping a floor under the S&P. So, we will need a solid earnings season to keep the party going. Also, we’ll need the next Fed meeting to be neutral to dovish (not hawkish). Open interest for the NASDAQ 100 futures on Friday declined sank by the greatest amount in more than 2 years. The closing of these contracts may mean that institutions, especially long/short equity funds, have been surfing the wave of tech Momo but are uneasy about their medium-term outlook.

Wage Check

Per UBS, real wages have been negative for two years—a record since the GFC. Thus, most people are hurting during this “strong labor market.”

China Check

China GDP increased by +4.5% in 1Q23, a strong result—the highest level in 12 mo and above the estimated 4% figure. Also, in Europe, the Chinese consumer spend data drove gains for luxury players like LVMH.

Japan Check

Japan’s market is at an 8-mo high, assisted by a weaker yen, which is at a 1-mo low versus the USD because the BOJ is committed to its dovish policy, so higher US rates translates into a relatively stronger USD.

Multiple Check

The forward multiple, per UBS, for the S&P is at 18.5x, which is near the upper bound for this cycle.

Bank Check

BofA profit beat because of debt traders’ profits, which netted bad loan issues. GS didn’t get the fixed income trade memo and fell short. BNYM beat on deposit figures.

Consumer Check

Interesting data out of BofA, per the below charts. Consumer spend on travel, grocery and services is crowding out discretionary/retail. Plus, they’re increasing their credit balances, so be careful with the “tons of savings” narrative folks are giving about the strong consumer. They’re using debt.

Bond Check

BBG is out with a story today about the widely different economic forecasts from big bond investors. From a soft-landing scenario by the Carillon Reams team to the hard landing view of the Columbia Total Return Bond Fund team. The one scenario they aren’t ready for? Sticky inflation with more hikes (and no cuts this year). So, now you know where consensus is.

Fun Check

I absolutely love the story out about Project Ratatouille at Amazon, its initiative to improve PR in France with a nod to the beloved Disney title. From showcasing local producers to Frenchifying Amazon’s presence brand-wise, you have to admit that being a fly on the wall during the creative session behind this initiative would have been amazing.