Economic Data Rebounds, Supply Chains, Student Loans

Happy 4^th of July! Equity investors are bullish going into the holiday weekend, as recent economic data has been unambiguously positive. On the other hand, the current period of low equity market volatility may be long in the tooth. The Federal Reserve’s interest rate hikes have little impact on existing homeowners. Starter homes are coming back. Supply chains look fully healed. Renewable energy ramp up. The Supreme Court struck down President Biden’s student loan forgiveness plan.

1. Equity positioning flipped to extremely stretched virtually overnight:

Source: Goldman Sachs; @dailychartbook  

2. Ned Davis Research’s U.S. Recession Probability Model is no longer expecting a recession after recent economic data:

Source: @NDR_Research  

3. Given the current level of bullishness, equity investors are likely to view a bout of volatility opportunistically:

Source: Deutsche Bank Research  

4. Mortgage rate lock-in is keeping the supply of existing homes for sale low:

Source: Wells Fargo Securities  

5. Homebuilders are stepping in to fill the demand for housing:

Source: The Daily Shot 6/28/2023

6. Softening home prices and discounting by homebuilders is causing the share of low-priced homes to rise:

Source: Calculated Risk  

7. This analysis indicates that stockpiling drove a large portion of the supply chain stress, an example of the “bullwhip” effect:

Source: The Economist   Read full article  

8. Realizing these estimates will require major infrastructure investments:

Source: Alpine Macro  

9. Read our analysis on the economic impacts here:

Source: @CivicScience   Read full article