Charts of the Week
Weekly KnowHow
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Welcome to the first charts of the week product. The aim of this product is to highlight some interesting charts that support our current views, challenge the consensual view or are simply just interesting to share. As always, if you ever have any questions then feel free to reach out.
1. Inflation and Yields disconnect: This chart by Deutsche Bank analyst Aleksandar Kocic highlights how willing the market is to accept the view that inflation is ‘transitory’. The disconnect has not been seen at any other time since 1985 and it is even more interesting to see the disconnect has actually increased since March.
2. US Index futures suggest most optimism since 2000: This chart from Julian Emanuel, head of equity and derivatives strategy at BTIG, highlights that the ratio between put and call options, based on 10-day average volume, fell below 0.5 for the first time since July 2000. The ratio declines as optimism rises, and visa versa.
3. Consumer Buying Conditions Deteriorate: Ben Breitholtz, from Arbor Research, noted this week that there’s been a big drop-off in perceived buying conditions for all kinds of durables, per the latest University of Michigan survey out last Friday. Conditions are now back to levels last seen in 1978…
4. How has inflation operated in a low labour change environment? In the context of the ongoing debate around whether inflation is transitory, Jurrien Timmer from Fidelity published some interesting analysis looking at how inflation has historically operated in a low labour change environment. So, as demographics shift and the labour force isn’t growing to the same extent, can you really get inflation? History would suggest not…
5. How is electricity demand by charging station set to change by over the next 20 years? This chart from Bloomberg’s Akshat Rathi attempts to break out where electricity demand will come from over the next 20 years. What is interesting is that even though many expect fast-charging networks to be the key to mass EV take-up, they are likely to be responsible for less than half the energy EVs need, according to BloombergNEF’s estimates.
6. Bond market and equity market pricing in divergent views on inflation: Soc Gen’s strategist, Andrew Lapthorne, published an interesting chart this wek highlighting that equity traders are increasingly reflecting divergent views on the inflation threat to fixed-income traders. This is based on a basket of global shares that outperform amid expectations of price pressure.
7. Who is the most willing to pay for sustainable products? This is a pretty interesting report from McKinsey.They have attempted analyse the path forward for sustainability in European grocery retail sector. Support for sustainability differs from one consumer profile to the next as you may expect and depends on ESG priorities, products, and channels. For example, as you can see below, women, young customers (Gen Z), and shoppers with higher incomes value sustainability more than their counterparts in other consumer demographics.
8. European inflows the largest since 2015: We are continuing to see sustained inflows into the European market as investors continue to pile into more cyclical and value stocks. The chart below highlights that in May inflows were the largest since 2015 but also shows the sustained inflows we have seen since the turn of the year.
9. Is Big Tech that expensive? With stocks hitting new records across the board, it is interesting to see that the price-to-earnings ratio for the megacap FAANG tech shares like Facebook and Apple, which make up roughly a quarter of the S&P 500, sits just below 47, which is almost its exact average over the past five years and down from nearly 59 in mid-February. Indexes are the same: The S&P 500 price-to-earnings ratio is currently 30 after hitting an all-time high of 32 in late March.
