Supply Chain Bottlenecks Persist, New Home Sales Miss Expectations, and Europe’s Yield Curve Moves into the Negative

Although this past year has been about getting back to normal, history shows that this uninterrupted bull market still stands out as tech mega-caps come storming back. New home sales missed expectations, falling below levels seen this time in 2019, while credit card data shows households paying off their debt even as usage surges. Perhaps these are continued signs of normalization for Americans. Meanwhile, supply chains are still experiencing bottlenecks, inventory-to-sales ratios are at record lows and higher prices don’t seem to be affecting profits—an indicator that cost increases are being passed through to consumers. Keeping an eye on the rest of the world, the Delta Variant remains a threat as European bonds react sending the yield curve almost entirely into the negative while China continues to struggle with climbing debt as the stock market rally stalls.

1. Little has been normal over the past 18 months, but we still like to show historical norms:

Source: The Daily Shot, from 7/27/21

2. The last time this happened the driving names were Rockefeller, Vanderbilt, Carnegie…

Source: Bloomberg, from 7/27/21

3. Existing U.S. home sales have fallen three months in a row now. It appears to be part of the pandemic normalization process….

Source: Reuters, from 7/27/21

4. Evidence that more Americans are still living within their means as uncertainty of the future still prevails:

Source: Wall Street Journal, from 7/27/21

5. The regional Fed surveys continued showing manufacturing strength last month.  They also are showing that manufacturers are passing through the price increases to consumers:

Source: The Daily Shot, from 7/28/21

6. When the cupboards are bare, passing through price increases to those in need is much easier:

Source: The Daily Shot, from 7/28/21

7. So far, higher prices have not significantly affected profits…another indicator that cost increases are being passed through to consumers:

Source: The Daily Shot, from 7/28/21

8. Some crucial supply bottlenecks are going to take a lot more time to resolve:

Source: Bloomberg, from 7/27/21

9. Is the Delta variant causing European bonds to react, over-react, or is it a prediction of a more ominous low-growth scenario?

Source: The Daily Shot, from 7/28/21

10. In addition to their surging bond debt, Chinese margin debt is also accelerating. A Chinese 2007?

Source: The Daily Shot, from 7/27/21

11. Here is the recent Covid data at the extremes:

Source: State Health Departments, from 7/28/21