Financial Conditions, Retail Sales, Government Debt

The financial markets are working in the Federal Reserve’s favor, as interest rates across the yield curve hit 5% this week. The tighter financial conditions are weighing on asset prices but, so far, the economy has remained resilient. More workers are coming off the sidelines. Capitalization weight vs equal weight. Alternative energy vehicle sales. Who is buying the U.S. government’s debt?

1. In recent speeches, Federal Reserve officials have pointed to the tightening effects of the steepening yield curve as a reason to hold off on additional rate hikes:

Source: The Daily Shot 10/19/2023

2. The market sees some chance of an additional rate hike and continues to price in rates staying higher for longer:

Source: The Daily Shot 10/18/2023

3. U.S. consumer spending in September was higher than expected:

Source: The Daily Shot 10/18/2023

4. Increased supply of labor is enabling continued job growth without upward wage pressure:

Source: Oxford Economics

5. The earnings multiple of equal weighted U.S. stocks has diverged substantially from capitalization weighted U.S. stocks:

Source: @TheTerminal, Bloomberg Finance L.P.

6. Alternative energy vehicles now make up over 15% of new vehicle sales:

Source: @EIAgov

7. U.S. households are now buying a larger share of new treasury and, notably, the Federal Reserve is a net seller:

Source: Capital Economics

8. Most of the government’s debt is held by U.S. entities and the percentage owned by foreign investors, while still relatively large, has fallen in recent years:

Source: Goldman Sachs; @MikeZaccardi