10 Things You Need to Know: June 27, 2023
Key data releases this week include: durable goods orders (Tue), FHFA House Price Index (Tue), new home sales (Tue), consumer confidence (Tue), Q1 GPD revision (Thu), pending home sales (Thu), personal income and spending (Fri), PCE deflator (Fri), and consumer sentiment (Fri).
Haver
June 22, 2023
Sales of existing homes posted a 0.2% increase in May (-20.4% y/y) to 4.30 million units (SAAR) from 4.29 million units in April. Sales remained up from the January low of 4.00 million. The Action Economics Forecast Survey expected April sales of 4.25 million units. Single-family home sales eased 0.3% (-20.0% y/y) to 3.85 million units after falling 3.3% to 3.86 million in April.
Haver
June 22, 2023
The U.S. Leading Economic Index (LEI) fell 0.7% m/m in May after unrevised drops of 0.6% in April and 1.2% in March, according to The Conference Board. A 0.8% m/m May decline had been expected in the Action Economics Forecast Survey. The May LEI at 106.7 was the lowest level since July 2020. Four of the LEI’s ten indicators in May contributed negatively to the index change.
Capital Economics
June 21,2023
We expect the mild recession in the euro-zone to drag on for the rest of the year. Households will cut their spending in light of stagnant real incomes and rising borrowing costs while companies will scale back their investment plans. However, the labor market looks set to remain tight, keeping wage and underlying price pressures strong.
Reuters, The New York Times, Financial Times
June 22, 2023
The Bank of England has taken bold action against mounting inflationary pressures by unexpectedly raising interest rates by half a percentage point to reach 5%, the highest level since 2008. The central bank’s Monetary Policy Committee, voting 7-2 in favor of the increase, cited concerning economic data revealing intensified inflationary pressures in the UK economy as the impetus behind the decision.
Barron’s
June 26, 2023
There was a significant repricing in equities over the past 18 months, as interest rates rose, among other factors. Valuations fell sharply. The cyclically adjusted price/earnings ratio, or CAPE, was at 40 in December 2021, about two standard errors higher than Vanguard’s fair value range of 25-30 at that time. By May 2023, the CAPE had fallen to just over 29, a decline of nearly 27%, yet still above our current fair value range of 20-26.
Barron’s
June 26, 2023
Thirty years ago the S&P 500 index was a good way to diversify. Its stocks averaged just 10% to 12% correlation with each other. That’s now 50%, and at times as high as 80%. Concentration is high, with seven stocks contributing all of this year’s gains.
Barron’s
June 26, 2023
The latest tally of U.S. public companies now stands at 5,938, according to the World Federation of Exchanges, down 27% from a peak of 8,156 in 1997.
Capital Economics
June 22, 2023
Easing financial conditions, improving consumer sentiment and the stabilization in housing suggest that the risks of an imminent recession have eased slightly. Nonetheless, our tracking models still imply that an economic contraction is highly likely later this year.
Capital Economics
June 26, 2023
EMs will account for over half of global GDP within the next decade and almost 60% by 2050. India will become the world’s third-largest economy before 2030. More generally, EMs with rapid population growth, with potential to develop into manufacturing hubs (including through friend-shoring) or that stand to benefit from the global energy transition will jump up the league table of GDP rankings.