To The Moon

Welcome to another edition the “Off-Topic ChartStorm“. Unlike the usual weekly ChartStorm(which focuses on the S&P500 and related issues), the Off-Topic ChartStorm is basically a semi-regular special focus piece with topics spanning macro, markets, stocks, commodities, regions, and research notes. You should expect to see a mix of the timely and front-of-mind issues, as well as some more non-obvious areas under the radar. Hope you enjoy! 1. Recession Feeling Recession is slowly but surely becoming the consensus as the evidence builds up — the latest BofA fund manager survey shows the majority now expecting recession over the next 12-months. While you sometimes want to go against the consensus, the chart goes to illustrate how the crowd often gets it right on the way into a changing situation (and then often ends up overstaying its welcome). The key example would be the leadup to 2008. The 2020 situation on the other hand was an entirely different beast — basically artificial (turn the economy off over night), and paired with massive stimulus. 2022/23 meanwhile is your more traditional recession setup, and likely doesn’t involve the same kind of quick fix. 2."New Orders?" or "No Orders!" The empire manufacturing future new orders indicator has dropped into recession territory. 3. Tech Sector Layoffs Although ‘small’ in the scheme of things (the sector has a disproportionately small share of employment vs earnings/market cap/GDP contribution) but as a canary in the coalmine it's a very clear warning sign. I would point out that a lot of the larger tech companies have already disrupted/eaten sufficient market share that by now it’s less about adoption and innovation and more about what’s happening with the economy in terms of marginal revenue growth. This would be a key sign and symptom if that assertion is true (cost-cutting into a downturn). $Meta Platforms, Inc.(META)$ $Amazon.com(AMZN)$ $Twitter(TWTR)$ $Salesforce.com(CRM)$ $Redfin Corp(RDFN)$ $Lyft, Inc.(LYFT)$ $Opendoor Technologies Inc(OPEN)$ $Sema4 Holdings Corp.(SMFR)$ $Zendesk(ZEN)$ $Booking Holdings(BKNG)$ $Upstart Holdings, Inc.(UPST)$ $Coinbase Global, Inc.(COIN)$ 4. Housing Boom & Bust Cycles One key element of the apparent impending recession is the rapidly unfolding housing bust (and it can easily become a self-reinforcing factor). With the interest rate shock + cost of living shock + apparent economic slowdown (+fact that US housing market is themost overvalued in history), housing is naturally going to have a bad time. Can already see it in the charts... 5. CRE Crunch It's a similar story inCommercial Real Estate, where rising interest rates, uncertainty on occupancy (WFH and cost cutting), and stretched prices thanks to yield-chasing, have seen banks become a lot more cautious on lending — which is often a precursor to a downturn in in the sector. 6. Shipping Sink Taking a global perspective, there are some clear signs that global trade is cooling. The demand + supply shocks drove shipping costs to record levels, but as the supply side responds and demand cools: round-trip. 7.Global Credit Crunch The monetary tides are going out… If a rising tide floats all boats, a receding tide may well sink all boats! 8. The Monetary Script The global manufacturing PMI is sticking to the scriptset by central bankers. It's simple: ease policy, economy goes up, tighten policy, economy goes down. This is counter-cyclical macroeconomic policy 101. 9. Pivot vs Profits Pivot Likers need to take note on this one. Yes, the Fed likes to decelerate tightening and then ease heading into recession... but then earnings go down (and sometimes bigly). 10. Recession Trading Best not to get to cavalier about risk taking heading into recession, it's hard to know how long/deep a recession will be (+what may break along the way). This chart is a cautionary that yes markets will look to price recession in, but often the ultimate bottom comes later in the process... https://chartstorm.substack.com/p/off-topic-chartstorm-recession-watch