The US debt hole grows bigger. Higher interest rates do not help
The problem with deficits is that they add up. Each annual deficit adds to the total National Debt. This debt hole grows bigger because of annual interest expense on all this debt. Not a problem when interest rates are ~0%. Big problem when they're 5% per year (now). Source: Jesse Myers Croesus_BTC
Concentration Alert! A handful of tech stocks are responsible for a large portion of stock market returns lately
Mega-cap tech stocks like Apple, Microsoft, Amazon, and Alphabet are driving the rally, so far in 2023. Source: Genuine Impact
Good news! Bloomberg US Financial conditions has been loosening since banking turmoil stabilized
Source: Bloomberg
Gold holdings as % of Nations private net wealth
Source: QuantInvestor.substack.com
Chinese real estate bonds are negative again in 2023!
Chinese real estate bonds have turned negative since the beginning of the year, erasing its big rally earlier this year. Investor sentiment has been dampened since the collapse of one of the only offshore 2023 new issues (Wanda Group / -30pts), doubts about the ability of SOEs to meet their obligations (Sino-Ocean / -46pts) and as restructuring plans seem to be a very long way to return on investment. Yet the (modest) recovery appears to be taking hold, with new home prices and home sales rising for the second consecutive month in March and the sector growing yoy in the Q12023, after six quarters of contraction. Source: Bloomberg
Favouring high-quality bonds over other asset classes in the coming months?
BofA's traditional monthly survey of global fund managers has been released and shows that investors are the most overweight bonds over stocks since March 2009! Investors are also the most record longs in Investment Grade vs. High Yield since inception (2015). Source: Bank of America
Short squeze 2.0?
Hedge Funds are still massively short. This could lead to another massive short squeeze. Source chart: Alessio Urban, Goldman Sachs
This time, higher oil prices will not contribute much to the performance of high yield?
Since the surprise OPEC+ production cut, oil prices have gained over 7%. At first glance, this could be seen as a positive for U.S. high yield, as energy is a large component of the index (>12%). Unfortunately, HY Energy spreads are already historically tight relative to its index and the potential for further tightening is low. Source : Bloomberg
