Delta North Macro

@ernietedeschi Chart that over the inverse of u3. Then make the time period 2022-2026

With this latest JOLTS release, we're at a US labor market churn rate that's among the lowest since data began, rivaling the depths of the Great Recession.

@profplum99 @ernietedeschi Supportive of the idea that businesses were spreading the tariff burden not only across impacted goods, but their full suite of goods and services offerings. Helped reduce sticker-shock at the register, and explains why the pass through this go around seems less than 2018-2019

@profplum99 @ernietedeschi The driver is wage sensitive + tariff sensitive services. Break up supercore into wage sensitive and non wage sensitive. Then break wage sensitive into tariff sensitive (i.e uses good input - vehicle maintenance services, household operation services etc)

A propos of Powell's comments just now: non-housing services inflation versus ECI wage growth. You can see a bit of a wedge opening up, with nominal wage growth cooling while services inflation stays tenacious.

@profplum99 @ernietedeschi And non wage sensitive (e.g. education services). Gap between wage sensitive and tariff sensitive vs wage sensitive and non wage sensitive started to emerge in 1H25, just when the gap between wage sensitive supercore and wage growth (e.g Atlanta fed, ECI, AHE) emerged

Risk premium rising across equities and credit while intraday correlation between oil and equities around -80%. Oil shocks push the tide out and expose underlying weak links. The peak in oil in June 2022 explained the first low in markets (and peak in spreads) in June 2022. Oil shocks also tend to depress core inflation measures as they can destroy demand.

@EPBResearch What Data set are you using? Atlanta fed job switcher vs stayer is inflecting upwards right now

From the ADP report: "The pay premium for switching employers hit a record low in February." When the jobs market is hot, you can command increases in pay for switching jobs but in a cool labor market, that premium compresses.

@Citrini7 It’s all flows/positon squaring after the latest NFP. Real/fast money were/are in the steepener trade

Anyone have a hot take on why the yield curve is flattening? Seems a weird response to news that the Fed got served.

@TheCompoundNews @mattcerminaro Conversely, March 1995 was a period of rising risk premiums, so the base effects from that period probably look great. Interesting analysis, but I am unsure if 12/22/2020 is the correct period to be indexing fwd multiples too.

In the five years leading into the Tech Bubble peak, the forward P/E on the S&P 500 Tech Sector expanded by 43x. In the past five years it has contracted by -1x👀📊 Via: @mattcerminaro @ chartkidmatt.com🔥🔥

@TheCompoundNews @mattcerminaro Isn’t this being indexed to 12/22/2020, which was almost the peak of the post-Covid stimulus boom in tech? Valuations of unprofitable tech (e.g. SPACs etc.) were insane the. Using that period as your base index, it makes sense valuations are flat to down.

@dampedspring So essentially massive stagflation combined with a term premium shock? Where are you seeing terminal rates being priced at in this scenario?

Channeling my inner Byron Wein. Here are some predictions that are unlikely but I think will come true in 2026. They each are related to the number 5 US Ten year yield hits 5% SPX goes below 6000 (5 thousand handle) Bitcoin goes below 60,000 (50,000 handle) Gold goes above 5,000

Transports' outperformance reflects positive macro surprises ... our cyclical models (leading by 9,12,18, & 24 months) point to expansionary ISM MFG trends in '26 after three years of weakness. The key for equities will be the labor market, and whether softness persists and can keep a lid on interest rates. @carlquintanilla @SaraEisen

Something not talked about enough is how the year 1971 broke the US economy forever Here are 20 fascinating charts to show you what I mean 1. Productivity has skyrocketed while salaries have not moved at nearly the same pace.

@DiMartinoBooth The cut itself provides only incremental benefit, to businesses and consumers with debt directly tied to 1-month SOFR

@DiMartinoBooth If helpful, GS published an analysis about a year ago showing that roughly 90% of the positive economic impulse associated with a rate cut is actually delivered through the financial-conditions easing before the cut occurs.

At the margin, there won’t immediate effect. But the same way Higher for Longer is still at work (see 15-yr high bankruptcies), the lag effect of falling rates will eventually manifest. This economy hasn’t created a single job outside “recession-proof” Education & HC since APRIL

@intelarb Thanks for the chart. How are you measuring breadth?

Yesterday was the worst breadth day EVER for the S&P 500 while it was up on the day. Nearly 400 stocks fell while the index still closed up +0.3%. Top 10 worst breadth days below… are all in the last few years. #dispersion $SPX $VOO $SPY

@BobEUnlimited Hey Bob, great thread! Any thoughts on the shift from tangible to intangible investments over the years? Seems like it should bias P/E multiples higher since intangibles (like brand, software) hit Opex directly, unlike tangible investments that are depreciated (tax benefits)

But its not just earnings growth expectations over the medium-term, US equity markets are pricing in extraordinary growth over the longer-term as well, with PEs today running just off of all time highs.

US stocks don't have an earnings problem, they have an expectations problem. With expectations of 3% real gdp in 2H24, earnings growth to reach 16% y/y by end of '25, and an AI boom ahead driving 21x multiples, such lofty expectations are a setup for disappointment. Thread.

@BobEUnlimited Hey Bob great piece. How do you factor in that NFP might actually be overstating job growth due to the surge in undocumented immigration? Seems like immigration has biased most jobs reports stronger (and why revisions have been so large).

With nearly 175bps of cuts px in over the next year and term premiums on long-bonds falling, markets are taking the UE rate shifts as the truth. A more comprehensive view suggests caution since the UE rate may be more of an outlier than the reality of the underlying dynamics.

The UE rate is rising while comprehensive measures of US growth are steady and running above potential over the same period. That suggests that policy moves driven by heavily weighting UE rate shifts are likely to result in rates that are too dovish given conditions. Thread.

While I wont digress here, other theories of what is driving growth like "fiscal-dominance" and high yields being net stimulative don't hold water once you crunch the numbers as I've shown before. The fiscal deficit has been contracting and income payments are small vs income growth along with being concentrated in the rich or non-gdp entities. x.com/BobEUnlimited/… x.com/BobEUnlimited/…

@PauloMacro @rev_cap Zillow Rents YoY runs on a 12.5month lead ahead of Shelter inflation with a R^2 in the high 70s…..interesting to note that if you look at that exact same dataset ex covid (so from ~2012-2019) the R^2 plummets to around 18-19%.

Nice thread by @rev_cap last week ICYMI👇

There’s no sugar coating this, CCP is in a very hard place, as much for it’s own policy choices as owing to current Fed and ECB uber hawkish monetary policies. Situation is more dire than laymen realize. Yuan is already one of Asia’s weakest $ pairs, down 6% YTD. Lowering 1y LPR by 10 bp when a deflationary spiral is now feeding a lower consumption loop shows how limited the policy margin really is. Even more telling is that they didn’t touch the 5y LPR which is far more important for mortgages. This when construction starts are down by 55% since 2021 and a massive inventory glut of over 27 trillion Yuan has to be re-balanced. Almost half of this inventory is unfinished and 40% (and rising) belong to distressed developers. Raising cash will necessarily entail liquidating part of this inventory when buyers are on strike, worse actually, when buyers are increasingly no longer servicing their mortgages. Losses will be in the trillions, over 2/3rd of which will be suffered by banks. How many trillions will depend on many variables, and even then, at current sales rates it will take many years for this to clear. Those who think China has an ideological agenda are wrong. They would be way more aggressive in kicking the can through liquidity, but they can’t. If they widen the rates gap they risk a bigger Yuan devaluation which would lead to capital flight at a time when geopolitical hurdles to inbound investments are raising. That leaves a heightened risk of deflation and contagion into shadow banks and other not yet distressed developers. I wrote about all this in 2021. With Zhongzhi Enterprise going into forced restructuring and many dodgy structured products sold to retail in default, contagion is now playing-out.