Charts of the Week

Happy Monday, friends. You know what that means, right? It’s time for another Charts of the Week! I’m excited as there’s a lot of great visualizations to share today.

Retail Raided

Theft at US retailers has more than doubled since 2015, a problem that’s concerning investors as it spirals out of control. Some states have even stopped or reduced enforcement of theft laws, exacerbating the problem. One that likely was made much worse by inflation driving a cost of living crisis in the US.

Quick Serve Restaurants Feasting on Sales

McDonalds stands out in the US QSR landscape, but check out Chick-fil-A sales per store. Pretty incredible. One has to wonder if they ever IPO.

Money Supply is on the Rise Again

Global M2 is on the rise from major economies, and that has helped to buoy some level of economic activity and appetite for risk.

It does not, however, account for the incredible gains in US stocks as the once positive correlation seems to have broken down, with broad M2 appreciably lower than stock price performance in 2023.

Tech Still Seems Very Expensive

Speaking of stocks, global tech shares are trading at the highest PE since the Dot Com bubble, which suggests that we may yet again be in a bubble as most of the gains year-to-date have been driven by multiple expansion rather than earnings improvement.

Morgan Stanley, who has been more bearish on this market and earnings, projects 0% earnings growth this year in the S&P 500, with tech growing at just 1%. It does beg the question as to whether tech shares should have such an incredibly strong bid if earnings aren’t following along.

AI Gains are Narrow

Most of the gains have been focused in AI proximal stocks. They’ve helped to drive the S&P 14% higher year to date. Without those same stocks the index has only climbed 4.5% in 2023.

The concentration is so stark that in the NASDAQ 100, the top five stocks account for about two-thirds of all of the year-to-date gains, with Nvidia alone driving the NASDAQ up 6.7% year-to-date.

Hedge Fund Exposure to Mega Cap Tech is Soaring

Leveraged players like hedge funds are also very, very long mega cap tech. In fact they’re the most long on record, which suggests that the trade may be a little bit crowded right now.

Meanwhile, central bank liquidity has been falling as tech has been surging, something we haven’t seen often. Usually the outcome isn’t ideal for stocks when central banks are tightening, but we’ve had quite the reprieve this year. At least so far.

Are Real Assets, Outside of Real Estate, a Buy?

This chart makes the case that perhaps real assets are attractive vs financial assets, though I would be cautious of real estate here.

I am looking at this chart because I think it may be one reason to give commodities careful consideration over the very long-term.

Home Affordability is at Record Lows

The American dream has become a bit of a nightmare for aspiring home buyers, with mortgage rates at a 21-year high and prices at or near all-time highs in many areas.

As a result, mortgage applications have sunk to the lowest level since 1995 as buying activity dwindles.

Home prices are beginning to weaken in the west, with Germany, the Netherlands, and the US showing some signs of retreating.

Meanwhile, home builders have had a rather remarkable run and may be set to retrace some of that should demand for homes continue to fall.

The Duality of Rising Rates

Zooming out to total real bank credit, it isn’t just mortgage applications. Credit issuance is slowing elsewhere, too, as banks reduce lending and demand drops due to higher rates.

On the other hand, buyers of short-term paper have been loving rising rates, collecting higher interest income along the way.

China Construction Slows Meaningfully

Building activity int he country has slowed to its lowest level since 2010, prompting further concerns about the health of the economy as it shows no real signs of accelerating. The government has promised a lot of stimulus, but delivered very little so far.

In Closing

I hope everyone enjoyed this Charts of the Week. If you have any questions or feedback feel free to share it below!