<![CDATA[The Weekly ChartStorm: Chart Of The Day]]>https://www.chartstorm.info/s/chart-of-the-dayhttps://substackcdn.com/image/fetch/$s_!hY19!,w_256,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fa0effcba-d9e7-431e-be37-d016de00810f_345x345.pngThe Weekly ChartStorm: Chart Of The Dayhttps://www.chartstorm.info/s/chart-of-the-daySubstackTue, 07 Apr 2026 05:23:11 GMT<![CDATA[Chart Of The Day - China vs USA Valuations ]]>https://www.chartstorm.info/p/chart-of-the-day-china-vs-usa-valuationshttps://www.chartstorm.info/p/chart-of-the-day-china-vs-usa-valuationsFri, 22 Sep 2023 20:03:40 GMTChina vs USA — Valuation Edition: Following on from the China vs USA relative performance chart, by request we have China vs USA valuations …and if you saw the post on relative performance then you can probably guess what it looks like already!

  • Technical note: the valuation metric we are looking at today is what I call the blended PE ratio — it is a simple average of the PE10 (price vs trailing avg earnings over a rolling 10yr period to smooth out the cyclical ups and downs), trailing PE (earnings over the past 12 months), and forward PE (analyst consensus estimates of earnings over the next 12 months).

  • I use this blended PE as an attempt to reconcile the strengths and weaknesses of each of those individual metrics and try and accentuate signal vs noise. For instance the PE10 can be inaccurate if there is a structural change in earnings level/growth, the forward earnings might be wildly optimistic (or pessimistic), and the trailing earnings can go to zero/negative and can see wild gyrations due to shocks and cycles.

  • But anyway, as to the key point, China is cheap vs history and vs USA (and vice versa for the USA). This is the part we people will say “yeah but China has geopolitical risk, property downturn, different companies, regulatory risk, etc etc” — and I would say: yep. It’s in the price, and that’s why the valuations are low. In that respect valuation indicators can almost be looked at as a sentiment indicator as much as a staid fundamental indicator. And at this moment it’s telling us investors are very confident on the USA, and very (too?) pessimistic on China.

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]]><![CDATA[Chart Of The Day - Gold Volatility Signal]]>https://www.chartstorm.info/p/chart-of-the-day-gold-volatilityhttps://www.chartstorm.info/p/chart-of-the-day-gold-volatilityMon, 18 Sep 2023 20:04:39 GMTGold Volatility: The gold volatility index reached a 4-year low last week, and has since then begun ticking higher. Much like the equivalent index for the stock market, (the VIX) this could be one of those classic “calm before the storm” moments.

  • Technical note: much like the VIX, the gold volatility index uses option prices (on the popular gold ETF ) to calculate implied volatility — which among other things reflects demand for options and realized levels of volatility, and is put together by CBOE.

  • One of the axioms of markets is that low volatility is a good predictor of future higher volatility (and vice versa). But another one is that spikes in volatility are typically consistent with exhaustion or the end of a trend, while troughs in volatility are often seen prior to the beginning of a new move.

  • When volatility collapses like this it often represents a stalemate or period of indecision — we see this also in the price action for gold (stuck in a tight trading-range), and on the macro as the various cross-currents find a momentary balance (e.g. inflation vs deflation risk, central bank tightening vs recession risk). The trough in volatility also means that options are basically cheaper than usual. So I would say an opportune moment to pay closer attention to the shiny yellow metal.

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]]><![CDATA[Chart Of The Day - Foreign Equity Allocations]]>https://www.chartstorm.info/p/chart-of-the-day-foreign-equity-allocationshttps://www.chartstorm.info/p/chart-of-the-day-foreign-equity-allocationsSun, 17 Sep 2023 22:16:28 GMTForeigners Love US Equities: The latest weekly chartstorm showed a few longer-term charts on the US stock market with extreme readings, and today’s chart only adds to the list.

  • Technical note: the chart uses data from the US Federal Reserve Flow of Funds report, and takes “Rest of World” (RoW) holdings of US equities as a proportion of all RoW holdings of US financial assets. Or aka, allocation to US equities. It’s basically the same method from last week’s chart on US household allocations to equities, but for foreigners.

  • At 57.3% as of Q2 2023, it is exactly on par with the dot com peak of 57.3% in Q1 2000 (albeit is slightly lower than the all-time-high of 59.2% in Q4 2021 i.e. when the US stock market peaked).

  • In terms of takeaway, my eyes are drawn to the two contrasting datapoints of the peak in 2000 and trough in 2009 — clearly this is a type of sentiment indicator, and denotes (over?)confidence by global investors in US equities. I would put it in the same basket as those extreme valuation and relative performance chart readings… not necessarily an indication of an imminent market downturn as such, but definitely smoothing you see late in the cycle.

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]]><![CDATA[COTD - Investor Sentiment vs Economic Sentiment]]>https://www.chartstorm.info/p/cotd-investor-sentiment-vs-economichttps://www.chartstorm.info/p/cotd-investor-sentiment-vs-economicThu, 14 Sep 2023 20:10:13 GMTEconomy vs Stockmarket: Back in 2022 investor sentiment was first to collapse, trough, then turn up… now economic sentiment is running a similar pattern. Is this a sort of green shoots to the non-recessionary recession, or a waiting trap?

  • Technical notes: the chart shows an equal weighted average of various measures of surveyed economic confidence in the black line (consumer, small business, services, manufacturing, housing, etc), while the red line shows surveyed sentiment on the stock market (bulls vs bears, using AAII + Investors Intelligence surveys). Z-scores are taken of each input to make them comparable/like-for-like.

  • There are a couple of interesting things going on in this chart, first is the way that they mostly travel a similar path across history. Second is how investor sentiment tends to be a little more manic and dramatic.

  • But one thing this chart made me ponder is how just as investor sentiment turned up and peaked (July) — was basically about the same time as the stock market peaked and moved into a more volatile/consolidation phase. Taking that parallel to economic confidence, maybe economic sentiment surges and recovers just as the long and variable lags of monetary tightening (and energy cost pressure resurgence) weighs-in and confounds the no-landing/soft-landing consensus… interesting chart and interesting possibility.

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]]><![CDATA[Chart Of The Day - US Equity Allocations]]>https://www.chartstorm.info/p/chart-of-the-day-us-equity-allocationshttps://www.chartstorm.info/p/chart-of-the-day-us-equity-allocationsWed, 13 Sep 2023 23:03:00 GMTAsset Allocation: Now that we have the Q2 update to the Fed “Flow of Funds” dataset (an aggregated account of the stock and flow of funds across the economy), we can take an updated look at investor allocations to equities.

  • First, technical note: the black line is surveyed portfolio allocations (from the AAII), the blue line is “implied allocations” (i.e. total equity mutual fund + ETF assets vs all assets in mutual funds + ETFs (from the ICI)), and the red line is aggregate US household holdings of equities vs financial assets (from the Fed).

  • One interesting point is the difference between them — the AAII survey (presumably more active + wealthier investors) shows generally higher allocations to equities vs the Fed FoF account of *all households* …which no doubt includes less active and lower income/net-worth investors. Also, as a side note, the blue line is arguably understated (by about 2-3ppts) more recently due to the regional bank run/rebalance out of deposits and into money market mutual funds.

  • But zooming out from the detail, we can see -across all metrics- investor allocations to equities are clearly elevated, and regardless of what people say or what you hear in the news, overall people are fairly bullish on equities. In particular, the Fed FoF aggregate picture shows household allocations to equities only 1ppt off the all-time-high, and *higher* than dot-com or pre-financial-crisis.

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]]><![CDATA[Chart Of The Day - Crude Oil Price]]>https://www.chartstorm.info/p/chart-of-the-day-crude-oil-pricehttps://www.chartstorm.info/p/chart-of-the-day-crude-oil-priceTue, 12 Sep 2023 20:38:44 GMTCrude Awakening: WTI crude oil has notched up a substantial 30%+ rally off the lows, and is now pushing up against a key resistance level (around ~$90/bbl), which if breached will open up the path above $100. Interestingly this has come with declining volatility (an orderly move).

  • Aside from the failed breakdown below a key long-term support level, WTI crude has also notched up a golden cross (50-day moving average crossing above the 200-day), and has busted comfortably through multiple short-term resistance levels.

  • While the technicals look good, the fundamentals are also decent with world oil demand breaking out to new post-covid highs, and supply growth constrained by multiple factors.

  • The steady move lower in crude oil implied volatility shows there is an air of certainty around the rally in oil prices (which at some point might become complacency). But one implication of this move will be increased uncertainty across the rest of markets as the oil rally threatens to trigger inflation resurgence and higher bond yields.

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]]><![CDATA[Chart Of The Day - Türkiye Take-off]]>https://www.chartstorm.info/p/chart-of-the-day-turkiye-take-offhttps://www.chartstorm.info/p/chart-of-the-day-turkiye-take-offTue, 12 Sep 2023 09:22:40 GMTHyper: Turkish equities are up +640% off the March 2020 lows… in nominal local currency terms. Seems impressive, and in many ways it is, but there are some nuances.

  • The chart shows the MSCI Turkey index in local currency terms. That should be the first clue — the TRY (Turkish lira) has dropped -77% vs the US dollar over the same period. So in USD terms over the same period the price return is a much lower, but still respectable +80%.

  • Another aspect is inflation, across that same period, Turkey’s CPI has gone up about +275% — as such inflation adjusted or real price local currency denominated returns therefore drop to ~95%.

  • So in some respects it’s a bit of a lesson in terms of inflation and/or FX adjusting returns to get a sense for the true/effective picture for both domestic and global investors respectively. But it’s also a lesson in terms of what hyperinflating nominal growth can do to stock prices in nominal terms.

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]]><![CDATA[Chart Of The Day - China vs USA]]>https://www.chartstorm.info/p/chart-of-the-day-china-vs-usahttps://www.chartstorm.info/p/chart-of-the-day-china-vs-usaMon, 11 Sep 2023 06:59:26 GMTChina vs USA: following a previous post on Japan vs USA, I had a request to do the same for China vs USA. And the resulting picture is pretty much just as wild.

  • First on a technical note, like with the Japan chart, I have converted the Shanghai Composite into US$ to make it comparable. Also, for reference, the Shanghai Stock Exchange, although founded in the 1800’s was put on ice during the tumultuous war and post-war period, and only reopened in the early-1990’s following Deng Xiaoping’s opening up and economic development campaigns. So that’s why we only have history back to the early-90’s in this chart, and even then it was a bit wild-west in the early stages.

  • In terms of performance or long-term patterns, this one really does look like a case of long-term mean reversion (punctuated by bouts of booms and bubbles). I’ve often described the Chinese stock market as an on-or-off market, and when it’s on, it’s on!

  • And that brings us to a very logical question: when is the switch going to be turned back on again? The answer to that comes in part from valuations (which are currently tracking cheap vs history/rates/rest-of-world), but perhaps more-so from stimulus — and as previously noted we’ve seen steps in the right direction, but are yet to reach a critical mass. So definitely an interesting chart in terms of financial history, but also in terms of potential future opportunity.

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]]><![CDATA[Chart Of The Day - September Seasonality]]>https://www.chartstorm.info/p/chart-of-the-day-september-seasonalityhttps://www.chartstorm.info/p/chart-of-the-day-september-seasonalityTue, 05 Sep 2023 09:23:30 GMTThe Worst: September stands out as a month for a few reasons; the Northern Hemisphere gets back to work after summer holidays, the last 3 meaningful business months of the year are coming online, and as it seems — for some reason it’s historically the worst month for markets.

  • On a technical note, this table shows summary statistics for monthly price returns for the S&P500 over the 1964-2022 period (using a pivot table in excel). It is a description of what happened in the past.

  • As noted, September has historically been the worst month with the lowest monthly return (-0.6%) and lowest probability of a positive return (46%).

  • So is September stuffed? Well, not necessarily, I mean first of all, 46% is pretty close to 50/50 even if it is the worst. Second, seasonality is just a description of what happened in the past, and it shows, by definition the average experience… and there are sometimes very notably exceptions to the average (just check out the best/worst columns). And thirdly, as I’ve highlighted elsewhere, seasonality works slightly different in bull vs bear markets (albeit even then, September can still be slippery in bull markets).

  • So it’s interesting information, but as I always say, seasonality is secondary info — i.e. it should add to and build on an existing thesis, rather than being the basis for it. In other words, if your existing underlying thesis is bearish, then this will be very interesting information indeed.

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]]><![CDATA[Chart Of The Day - S&P500 Monthly Chart]]>https://www.chartstorm.info/p/chart-of-the-day-s-and-p500-monthly-ae6https://www.chartstorm.info/p/chart-of-the-day-s-and-p500-monthly-ae6Thu, 31 Aug 2023 20:15:10 GMTMonthly Chart: after a month of “turmoil”, with the first meaningful sell-off since March, the S&P 500 closed down just -1.77%. Given the resulting shakeout in sentiment (after seemingly all the bears threw in the towel), the August price action is likely going to be seen as a “healthy correction”.

  • Taking stock of the drawdown, from top (intraday high of 4607.07 on the 28th of July) to bottom (intraday low of 4360.3 on 22nd August) the correction/sell-off for the S&P 500 index amounted to -5.36%

  • The August dip breaks the 5-month streak of positive returns, but the index continues its streak (now 8-months in a row) above its upward-sloping 10-month moving average — so another datapoint for the healthy-correction camp.

  • All-up, the YTD stats are sitting at +17.4% (and 18.73% in total return terms, i.e. including dividends) as of the August 2023 close.

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]]><![CDATA[Chart Of The Day - Institutional Investor Confidence]]>https://www.chartstorm.info/p/chart-of-the-day-institutional-investorhttps://www.chartstorm.info/p/chart-of-the-day-institutional-investorWed, 30 Aug 2023 22:53:22 GMTFinally Bullish: North American institutional investors have only just become outright-bullish as of August (based on actual transaction data). Prospects of a soft landing, peak/pause in rates, and year-end rally are likely top of mind.

  • As a technical note, this index measures investor confidence based on “actual buying and selling patterns of institutional investors… A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.”

  • August saw a +12.9 point jump (largest move since Dec 2020) in the North American institutional investor index to 103.8 (strongest reading since Sep 2022).

  • We can clearly see institutional investors climbing the wall of worry since the low point of the index in December last year — recession prospects, rising rates, bank panics, stumbling house prices, debt ceiling debates, bear market warnings, China troubles, commercial real estate issues, and so-on and so-forth. Nothing has been able to stop the rally off the October lows… and as this group are likely facing pressure from stakeholders, institutional investors are now jumping on the bandwagon.

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]]><![CDATA[Chart Of The Day - Japan vs USA ]]>https://www.chartstorm.info/p/chart-of-the-day-japan-vs-usahttps://www.chartstorm.info/p/chart-of-the-day-japan-vs-usaTue, 29 Aug 2023 09:26:19 GMTLong-Term Perspective: today’s chart shows the wild history of relative performance for Japan vs US stocks. It’s interesting for sure because of the obvious “wow factor” …but hidden in the chart is a couple of important points for reflection.

  • First a quick technical note, the chart tracks Japanese equities (the Nikkei 225 — which I converted to US dollar terms, so as to be a like-for-like comparison) vs USA (Dow Jones Industrial Average — notably both of these indexes are price-weighted). Also, for clarity, if the line goes up it means Japanese stocks are outperforming, and if it goes down it means US stocks are outperforming.

  • The first point of reflection is just how stark the numbers are: Japan outperformed the US by over 90x during the period from 1950 to the peak in 1988 (and since the 1988 peak the US has outperformed Japan 15x). One takeaway from that is how country-selection can make a big difference.

  • But what I thought was particularly informative is how that relative performance line looked stretched in the 70’s vs the previous couple decades… and then it looked even more stretched in the 80s, and even much more stretched in the late-80s. Which is a lesson in terms of how far things can go when they get going. But also, all of a sudden the 90s saw just about all of that outperformance reversed. Which is equally a lesson in terms of how fast things can go when the mean reversion kicks in.

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Callum Thomas
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]]><![CDATA[Chart Of The Day - Global Small Value vs USA]]>https://www.chartstorm.info/p/chart-of-the-day-global-small-valuehttps://www.chartstorm.info/p/chart-of-the-day-global-small-valueFri, 25 Aug 2023 06:03:38 GMTThe worst vs the best: what happens when you take the intersection of the cheapest parts of global equities and map its performance against the most expensive part?

  • I originally put this chart together because I had independently found deep relative-value (i.e. one cheap vs the other expensive) in each of: small caps vs large caps, value vs growth, and Global ex-US equities vs USA.

  • These valuation gaps arose from more than a decade of underperformance (as the combined chart below shows) hence my quip at the start — this basically being a comparison of the worst vs the best parts of global equities.

  • But cycle-noticers will recognize an apparent pattern in the chart: ~decadal cycles of under/out-performance… and it sure looks like the line in this chart is in the process of bottoming; potentially opening up a decade of travel in the other direction (which would be consistent with the relative value case I mentioned). So definitely an interesting chart for the long-term minded and value-oriented global equity investors out there (if there are any left!).

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Callum Thomas
Founder and Editor at The Weekly ChartStorm

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]]><![CDATA[Chart Of The Day - What's up with Retail?]]>https://www.chartstorm.info/p/chart-of-the-day-whats-up-with-retailhttps://www.chartstorm.info/p/chart-of-the-day-whats-up-with-retailWed, 23 Aug 2023 18:51:53 GMTRetail in Crisis: credit events usually happen one of two ways — either completely out of the blue e.g. the covid crash, or “slowly at first, then all of a sudden”. I was just looking at CDS pricing (Credit Default Swaps, which are basically insurance against a credit event) across the various sectors, and Retail falls firmly into that second category… a slow and steady uptrend, but now priced as if a credit crisis is in progress.

  • In fairness, the CDS market is notoriously illiquid and has been subject to manipulation in the past, but the fact that the black line in the chart below has been on a steady uptrend gives it some veracity (not to mention that retail stocks have underperformed the S&P500 by about -13% this year).

  • But what’s driving it, and why now? Firstly, we all know retail has been under pressure from the rise of ecommerce, and then of course covid threw things into disarray — with one hangover being a glut of inventory (not to mention lingering shifts in behavior e.g. work-from-home), but also the cost of living crisis and at least by media accounts a rolling crimewave with companies even noting shrinkage as a major issue in earnings reports.

  • And it’s unlikely to get better, consumers have run down the cash they stocked up during the pandemic stimulus, mortgage rates are putting pressure on those who weren’t lucky enough to fix (and putting those who did lock-in low rates in “mortgage jail”) — but also putting pressure on landlords to lift rents, and then you have the student loan payment pause rolling off shortly… and if that wasn’t enough, energy prices are rising again (WTI crude oil up 20% off the lows) after SPR releases previously provided some relief.

  • So maybe I’m missing something to confound or cancel out all that, but I have to say it doesn’t look good for the retail sector.

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]]><![CDATA[Chart Of The Day - Here we go again (banks)]]>https://www.chartstorm.info/p/chart-of-the-day-here-we-go-againhttps://www.chartstorm.info/p/chart-of-the-day-here-we-go-againTue, 22 Aug 2023 20:32:49 GMTRegional Banks: they say nothing good happens below the 200-day moving average (especially when it’s downward sloping), and if you want a timely reminder on that just take a look at the price action in regional banks.

  • After a solid rally off the lows (nice trading bounce), regional banks are turning down again from what is likely to be a formidable overhead resistance zone for the foreseeable future.

  • With a wave of bank credit rating downgrades, surging bond yields, and ongoing concerns around commercial real estate, we’ll likely see a revisit of that lower support level in the near future.

  • Interestingly though US bank CDS pricing remains anchored at the bottom end of the range, which suggests a degree of complacency… or perhaps well-placed faith(?) that the Fed will bail out the banks come what may.

SUBSCRIBE —> Important Note: if you would like to subscribe to receive the Chart of the Day series straight to your inbox;

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]]><![CDATA[Chart Of The Day - The Sentiment Trap]]>https://www.chartstorm.info/p/chart-of-the-day-the-sentiment-traphttps://www.chartstorm.info/p/chart-of-the-day-the-sentiment-trapMon, 21 Aug 2023 05:25:43 GMTSentiment Trap: just as seemingly everyone pivoted from bearish to bullish, like clockwork — the stock market kicked into correction mode.

  • Not to over-anthropomorphize things, but it sure does look like a trap!

  • When looking at sentiment indicators like the survey series below (which show the monthly averages for the AAII & II surveys), the strongest contrarian signals come when an indicator reaches and extreme (and then turns).

  • In that respect, the speed and magnitude of the moves up in bullishness and down in bearishness by itself is extreme, but also the level that both of those indicators got to, and then to cap it off the fact both have turned the corner: collectively make for a clear contrarian bearish sentiment signal.

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Callum Thomas
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]]><![CDATA[Chart Of The Day - Extraterrestrial Investing]]>https://www.chartstorm.info/p/chart-of-the-day-extraterrestrialhttps://www.chartstorm.info/p/chart-of-the-day-extraterrestrialFri, 18 Aug 2023 00:10:32 GMTSpace ETFs: as a matter of personal interest, but also of topical interest given the recent rise of the commercial space sector (not to mention increasing interest/news around UAP!), I thought it would be worth keeping tabs on the flow of investment (or underinvestment as it turns out) into space-related ETFs.

  • Currently, pure-play space ETFs (which tend to hold more of the NewSpace companies like RocketLab, Virgin Galactic, et al (albeit, do NOT hold the much larger and unlisted/private SpaceX)) — such as US listed ETFs and UK listed funds JEDI, YODA, SSIT — account for about 0.01% of all US-listed Equity ETF assets under management.

  • The broader and more diverse Aerospace & Defense category (which includes legacy space stalwarts (e.g. Boeing, Lockheed Martin, et al) the likes of which were involved all the way back during the moon landings) is a bit bigger, with ETFs such as as a group accounting for 0.17% of US-listed equity ETF AUM.

  • Where I think this gets interesting is firstly, the market share or implied allocation to Aerospace & Defense of 0.17% compares to a market cap weighting of 1.6% for that sector (about a 10x difference, which suggests ETF investors are massively underinvested).

  • Meanwhile, on the Pure-Play/NewSpace sector, it’s anyone’s guess as to how big that will get over time (could easily one day become the largest sector on the stockmarket when you consider future potential for space-based manufacturing and mining, mars/moon colonies, orbital habitats, etc). So while most investors don’t appear to be giving it much thought right now, I think space-investing is worth keeping on the radar.

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]]><![CDATA[Chart Of The Day - VIX Seasonality]]>https://www.chartstorm.info/p/chart-of-the-day-vix-seasonalityhttps://www.chartstorm.info/p/chart-of-the-day-vix-seasonalityThu, 17 Aug 2023 00:35:35 GMTIt’s Volatility Season: seasonal patterns are well documented in the physical world, with reliable seasonal swings seen in economic data and socio-behavioral trends. So it only makes sense that we also see seasonality in the markets, and around this time of the year volatility has a seasonal tendency to push higher …and as if right on que, here comes the VIX.

  • The tendency for higher volatility mirrors the trend for weaker stock prices around this time of the year (sometimes referred to as the Halloween effect).

  • As a technical note, seasonality is simply an average of what happened in the past, and it is important to note that there are exceptions to the seasonal rule (i.e. seasonality doesn’t always work!).

  • In terms of the current context, as noted last week, the market has kicked into correction mode from overbought, overvalued, and overly-optimistic conditions. We went from everyone being bearish in October 2022, to everyone being bullish in July 2023… but meanwhile monetary & credit conditions are tighter than ever, inflation risks resurging, and multiple leading indicators point to recession. So it’s probably a good idea to pay attention to this seasonal signal.

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Sincerely,
Callum Thomas
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]]><![CDATA[Chart Of The Day - Retail Investor REIT Allocations]]>https://www.chartstorm.info/p/chart-of-the-day-retail-investorhttps://www.chartstorm.info/p/chart-of-the-day-retail-investorTue, 15 Aug 2023 19:20:19 GMTRefusing REITs: Yesterday I shared a chart on Twitter (well, what is now called “X”, but as I’ve been on it since 2009 I still call it Twitter) — it showed fund managers reporting the most significant underweights to REITs since 2008 (…you know, real estate blowing up the world’s financial system 2008). But it turns out they are not alone, retail are also shunning REITs, with the implied allocations to REIT ETFs by US investors tracking at the lowest level on record.

  • First a technical note: this chart shows the “market share” of REIT ETFs (assets in REITs vs all ETF assets) — which loosely translates to the implied portfolio allocations to the sector (and is basically confirmed by other survey data).

  • Second, just to pre-address; this chart will show declines in allocations simply by virtue of other ETFs gathering more assets or putting in better price performance, but then that’s also kind of the point — if this one goes down it means investors are either actively or passively pivoting away from REIT ETFs as an investment relative to other alternatives (because they don’t see it as a good opportunity).

  • As to implications, we always want to pay attention when a chart or indicator shows an extreme, and this is definitely an extreme. From my work, REITs as a group are not really cheap yet in terms of absolute valuations (albeit no longer expensive), and still face real challenges and macro headwinds — but at this point everyone seems to already understand this and have adjusted accordingly.

  • So you might argue at this point if REITs simply avoid 2008-style apocalypse (when REITs fell ~75% top-to-bottom(!) [which compares to declines of just over 30% last year for US REITs]), it could be an interesting contrarian bull setup…

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Callum Thomas
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]]><![CDATA[Chart Of The Day - China Rate Cut]]>https://www.chartstorm.info/p/chart-of-the-day-china-rate-cuthttps://www.chartstorm.info/p/chart-of-the-day-china-rate-cutTue, 15 Aug 2023 05:45:08 GMTChina Monetary Stimulus: The People’s Bank of China just announced a -15bp cut to its “MLF Rate” (medium-term lending facility) — it typically projects cuts in its official benchmark policy rate (the LPR or Loan Prime Rate) via changes in the MLF rate, so we should expect a cut to the benchmark rate when it is next reviewed (usually the 20th of the month).

  • WHY: the PBOC faces a classic case for rate cuts; price data is deflationary, property market is in a downturn, reopening bounce has completely faded, macro data weakening, global growth also softening. Simple and clear cut case for stimulus.

  • WHAT’S NEXT: as I pointed out in my “10 Charts to Watch in 2023”, not only is this to be expected, but they should be doing more (at least another -100bps). But like all good central banks, they will be data-dependent.

  • SO WHAT: if they follow-through with more forceful stimulus that will be bullish for China/EM equities, commodities, and risk assets in general.

  • (n.b. the chart below substitutes in the MLF rate cut to the main benchmark rate)

SUBSCRIBE —> Important Note: if you would like to subscribe to receive the Chart of the Day series straight to your inbox;

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Thanks for your interest. Feedback and thoughts welcome.

Sincerely,
Callum Thomas
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