The pickup in global trade is an important shift in the last few months reflecting rising manufacturing & goods demand and putting pressure on global commodity prices.

Timeliest export data continue to show improving exports, with the rest of the world likely to follow. The improvement in global manufacturing and goods demand has aligned with a rebound in a broad set of commodity prices. The CRB is making highs not seen since in more than a decade.

https://x.com/BobEUnlimited/status/1780198248491171889

This is your irregular reminder that the PMIs are total garbage.

They should be ignored by those trying to understand the economy and faded by those trading markets.

For instance, the S&P Global Services looks nothing like services spending: Nor does the manufacturing number look like actual manufacturing:

EUR & UK showing accelerating growth despite an extended period of elevated rates.

Most expect H4L to slow growth over time, but recent US, UK, and EUR growth suggests that the initial hikes create a drag on growth, but then growth can return at a higher level of rates. Thread. Germany showing some signs of picking up in the last few months.

No landing is now the clear consensus.

US growth expectations ~2.5% for 2024, inflation 3%, UE rate <4% by end of '24, ~18% Q4 y/y earnings growth, and ~1 cut px in.

At the same time financial conditions have turned, making it even harder to achieve such lofty expectations. With 1Q24 GDP growth expectations for the release later this week around 2.5%, this suggests that GDP growth will remain as robust as it has recently through the rest of the year.

The big driver is expectations of very strong consumer demand:

Most investors have never traded through a period of rising global conflict, so these discrete instances provide useful perspective on how such events impact global markets.

It also highlights that most investors are poorly prepared, with a huge bet on peace. Stocks down: Unsurprisingly oil prices also rose at coincident with the attack.

This presents a uniquely difficult outcome for most investment portfolios from increased global conflict - equity assets are going down just at the same time that inflationary pressures are rising.

Not much has changed with real economic growth in the last 2 years despite all those wild swings in expectations.

And with long rates in this ballpark for the last 18m, its unlikely to change unless there is a new shock from even higher rates or an exogenous event.

UE flat: Employment growth stable.

Excited to share the new Unlimited Hedge Fund Barometer, which uses our replication technology for a unique look into how these managers are positioned for today's markets.

Highlights and link to the full report which shows positioning across ~60 asset classes/sectors.👇 Hedge Funds were an important driver of the global equity rally to kick off the year, shifting from modestly short to moderately long. At this point they have room to add more risk, but have been cautious to do so:

While small investors getting access to alts is generally a good thing, $DXYZ has more red flags than an episode of @CatfishMTV.

Lets start with the fact that the product page says the fees are 2.5% when the prospectus says they are 5% and keep going:

linkedin.com/posts/ttoilleb… $DXYZ happy to have no risk of investing language on their product page during the pump at least as recently as April 11th recorded by Wayback Machine...

But today looks like @sohailprasad got a conscience (or some better compliance advice) and added *very limited* disclosures.

Shady stuff @GaryGensler and @FINRA.

The US long-end is a global wrecking ball and its impact is picking up steam.

Global stocks, spreads, bonds and FX all feeling pain as US yield rises have accelerated in recent weeks. Highlights how the pressures for US yields to press higher will be felt globally. Thread. The US 10yr is up nearly 45bps in just a couple weeks and with that accelerating move up, asset market impacts have accelerated.

The most notable in US stocks which peaked as yields began moving higher, despite stronger than expected growth data and decent earnings.

Focus on the dynamics driving retail sales, not the nuances of the data.

As long as asset prices (stocks & houses) remain high, spending growth will remain strong.

Asset prices will remain high as long as long-term yields don't rise too much.

Long-term rates are the driver. This cycle has been pretty different from past cycles of late since nearly all the demand from HH is being financed by their income growth at this point.

As the left chart shows, HH spending today is being financed by income growth, an important shift from earlier dissaving.

Bitcoin may be many things, but it is not a geopolitical hedge.

This weekend was another good empirical test. BTC traded with a near perfect negative correlation over the last day to $PAXG, a gold backed token. If anything it's becoming an even worse hedge over time. Bitcoin exhibited similar market action last year as it traded down in the period following the Oct 7th attack, while gold traded up.

Wide ranging convo to close out the week on @CNBCOvertime yesterday.
* Commodity px rally broad based
* CRE not a meaningful issue for banks any time soon
* No IPOs is an effective support to the equity market recently.
Threads on each below.

Commodity price rally has been very broad based, suggesting its much broader story than a geopolitical pressure driving prices higher:

https://x.com/BobEUnlimited/status/1778759813003882799

Aggregate commodity prices are pushing back to near post GFC highs, suggesting input price pressures are broad based across the global economy.

This kind of breath should give central bankers pause that they are falling behind the curve and add hesitancy for fast cuts ahead. Shifts in expected monetary policy have aligned closely to these shifts in commodity prices over the last year.

As these prices fell, expectations of a swift shift to easing started to get priced in. But that story has largely fully reversed since the start of the year.

Conditions support an ECB shift to easing soon (Jun), but with growth continuing to hold up there's little urgency to move fast.

With 80bps of cuts already priced in for '24, stir traders will likely be disappointed, while EURUSD still looks rich given divergent conditions. The disinflationary trend is broad based across economies and segments of the economy. Most notably the recent wage numbers have come back in line with the 2% target.

Likely gives the ECB a fair amount of confidence that inflation is close to beat.

https://x.com/BobEUnlimited/status/1773677962509902285

While we all await the biggest US CPI print of our lives, lets turn to our neighbor up north to see the type of conditions actually aligned with a transition to cuts.

Growth is soft, UE is moving up rapidly, and core inflation is at target. Much different than US dynamics. A fair amount of the inflation continues to be from mortgage interest costs and gasoline prices (excluded above).

But even including these, headline inflation has also come down considerably, though remains a bit above the mandate on a year-over-year basis.

Headline weakness for NFIB today *understates* the concerning picture of the US econ from small biz.

Hard data measures, which are generally align pretty well with growth conditions, are decelerating quickly. Adding concern, inflation indications are picking up again. Thread. The most abrupt weakening is coming from the declines in actual job openings and planned employment to post-covid lows.

At today's 4.5% yields and above, stocks will struggle to rise further.

But at 4.5% yields, the real economy has enough momentum to keep going.

That's a recipe for weak stock and bond performance ahead.

Like last year's dynamics, but today at a higher level of yields. Thread. Last summer marked a turn in stocks driven by a rise in bond yields. It came at at a time when growth expectations priced into stocks were pretty elevated (due to the AI boom). That reversed when Fed/Treasury eased on Nov 1.

Stocks flattened Jul 31 & fell sharply at Sep 14:

Ahead of the release today we've got a pretty good sense from other datapoints on employment in the US. While its a tad softer than the heat of '22, its still looking secularly tight and stable for the last 9mo or so.

A scan of other data. ADP: flat and in line with stable UE: ADP may not reconcile with the employment report, but its benefit is that it is "real." That's why I like to look at claims as well. Initial claims is pretty stable and suggests stable unemployment.

The banking system is looking good despite the 60bps rise in the long-end recently. If anything signs of things improving for both small and large banks.

Suggests financial stability concerns wont impede further long-end rises.

Lets start with deposits, flat/picking up: Small banks keep increasing their loan book while large banks have kept it roughly steady for the last year or so. No signs of stress here.

Its hard to know what level of long-rates will be high enough or for how long they have to stay there to tip the economy into recession, but it is higher than today's rates.

A 5% yield last year cut 10% off equities, barely a flesh wound for savers & stocks are much higher now. Rates have been roughly at roughly the current channel since the fall of '22, so roughly 18 months. More than enough time to see a lot of the flow through effects occurring on the economy.

Thats not to say there isnt a continuous roll impact, but its incrementally slow moving.

Asset rally since Nov 1 was predicated on 6-7 Fed cuts in '24, inflation at Fed target, and falling long rates. Since the year started, these have mostly reversed.

So what's the catalyst for higher stocks & lower spreads ahead?

Cuts now fully priced out. h/t @countdraghula Measured inflation has risen and come in higher than expected for a few months.