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
OPEC is less worried about market share. Hence the production cut
Great point made by John Arnold on Twitter. The OPEC cut was only possible because of the inability/unwillingness of the US shale oil sector to grow at the same rate as it was in 2016-2020. With much less supply elasticity in the market today, OPEC is less worried about losing market share if it defends higher prices. Source chart: EIA
Commodities: why this time is different
To address the recent comparisons with 2008: today's macro setup could not be more different than the Global Financial Crisis. Back then, capital spending for oil producers was at record levels after a decade-long bull market in natural resource businesses. Today, aggregate capex is historically depressed while the commodities-to-equities ratio is near 50-year lows. Source: Tavi Costa, Crescat Capital, Bloomberg
Digital gold (bitcoin) correlation with gold is on the rise
While Bitcoin's $BTC correlation with the S&P 500 has been declining over the last year, it has been rising with Gold over the same period. Source: CNBC, Cryptoquant, Barchart
Bitcoin mining by country
Source: Bitcoin News via BitcoinPierre
US ISM manufacturing drops to 46.3, the lowest since May 2020, the month after the COVID recession ended
March ISM Manufacturing came out at 46.3 vs. 47.5 est. & 47.7 in prior month; new orders are down to 44.3, prices paid back into contraction at 49.2, and production edged slightly higher (but still contracting at 47.8). Employment fell further into contraction (lowest since July 2020). ISM started surveying in 1948. As this chart shows, this is the 16th time the ISM has been 46.3 or lower. 12 (75%) of these instances, the economy was either in recession or about to enter a recession Source: Liz Ann Sonders, Bianco Research, Bloomberg
The S&P500 has been failing regularly up here since last summer
Source: J-C Parets, All Star Charts
The most inverted US yield curve since the 80s
The 3-Month Treasury bill yield of 4.97% is now 1.42% higher than the 10-Year Treasury bond yield (3.55%). With data going back to 1962, only March 7, 1980 (recession: Feb-Jul 1980) had a more inverted yield curve than today. Source: Charlie Bilello
