Interest rates are (finally) rising, U.S. Leads Natural Gas Exports, and A Look at U.S. Equities Over the Last Decade
January 4, 2022 | FIRESIDE CHARTS
Happy New Year! It looks like the bond markets finally woke up to reality last week. How far and how fast will yields rise? The Fed regional manufacturing surveys were mixed last month but solidly in growth territory. China’s Real estate crisis is sure to bring more volatility in 2022 as large maturities will need to be paid off. Europe’s energy woes bring a wild ride with U.S. Liquified Natural Gas (LNG) to the rescue. A pair of cautionary charts on two of the markets darlings. 10 million new Covid cases reported last week is worth noting. Finally, some charts on the market that show how we got here and illustrate just how good we have had it for the last 12 years.
1. Interest rates quietly spent the week increasing across the curve:
Source: Thechartstore.com from 12/31/21
2. This trend accelerated on Monday. Is the bond market finally succumbing to inflation and QE tapering?
Source: The Daily Shot from 1/3/22
3. With inflation on the rise, real yields are decidedly negative. Will rates continue to increase to reduce the gap?
Source: Thechartstore.com from 12/31/21
4. The regional Fed surveys were mixed but still show positive manufacturing momentum. The prices paid reports had a more inflationary tone:
Source: The Daily Shot from 1/3/22
5. China’s real estate woes are likely to remain in the headlines:
Source: The Daily Shot from 1/3/22
6. With Russia cutting off gas supplies to Europe, the U.S. and others have sent LNG to the rescue. Natural gas prices, after a 300-400% increase, actually went negative yesterday in London.
Source: The Daily Shot from 1/4/22
7. Apple is now worth $3 trillion. When you create your own monopoly (Apple store), this becomes possible. Beware the anti-trust lawsuits and investigations going on here and abroad. Will Apple get broken up or forced to open up? Either way, parabola shaped assents do not last forever!
Source: The Daily Shot from 1/4/22
8. As an early adopter of Tesla (my VIN is just over 4,000) and a fan of EVs for years, I am in. Yet for investors, another note of caution: Tesla’s service model is broken. It took a physical visit to the dealer, after six months of trying via their app, to get an appointment to fix the five open safety recalls. (Phone calls to their service department have recently been allowed for the first time but try to get someone to answer). My observations while waiting and my own personal experience is that they are angering their loyal base. I am being polite. I’m not sure I’d buy another one. Tesla makes ~15% of the world’s EVs yet commands a stock valuation that is higher than every other car manufacturer in the world, including the other 85% of EVs.
Source: The Daily Shot from 1/4/22
9. What has driven the markets over the last ten years?
Source: The Daily Shot from 1/3/22
10. An interesting chart. Notice all the green in the plus columns? One negative year in twelve? Markets cannot go up forever without a re-grounding in economic reality. Will rising rates provide the catalyst?
Source: @AlbertBridgeCap
11. Covid cases doubled from two weeks ago to last week. The chart below is for the U.S., but the rest of the world looks similar, with ten million new cases reported last week alone. The silver lining appears to be that for those vaccinated, the disease is mostly mild.
Source: The Center for Systems Science and Engineering (CSSE) at JHU
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.