6.22.22: Will falling oil prices finally tame inflation?
Key U.S. and China brief market notes by Larry's Analyst Staff Team
Note to Readers: This is a new concise email newsletter format sent as part of Larry’s Investment Analyst Team communications to his public audience. To read his personal opinions, please read his separate public letters here. This email is designed to be primarily data-driven and will be sent out on Mondays/Wednesdays/Fridays. More qualitative commentary along with our actionable strategy and guidance is provided inside our Investment Community.
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In our emails, we will provide the following coverage points:
Brief Snapshot of U.S. & China markets and valuation
Our Analyst Team’s Chart in Focus
U.S. & China Upcoming Economic Calendar Snapshot
Notable Chart from Media Outlets
Fear & Greed Index Recap
I hope you find this newsletter to be insightful and enjoyable! - Larry and Team
U.S and China Markets Brief Snapshot 🇺🇸 🇨🇳
(Data: Powered by our Financial Data Partner YCharts)
S&P 500 Index: 3764.79
KWEB (Chinese Internet) ETF: $32.44
Analyst Team Note:
“At present, we are at 17x trailing earnings (3,765 divided by $216/share). The S&P has bottomed at 16x trailing earnings twice in the last 4 years, once in 2018 and again in 2020. Just after the Great Recession (2012), valuations were lower, at 14x, since markets were still unsure of the pace of any future recovery or if lingering aftershocks from the Financial Crisis would cause another recession.” - DataTrek Research
Over the weekend, China completed what is known as the "618" shopping season which covers the first 18 days of June. This is China’s second-largest consumer shopping event next to its annual “Singles Day” event held in November.
Note: This was China's first such major consumer-related shopping event since “zero-COVID” began. J.P. Morgan believes that overall revenue for the participating Chinese companies “should be better than the cautious guidance provided by the e-commerce companies in general”.
Macro Chart In Focus
Analyst Team Note:
Rapid home price appreciation during the pandemic has pushed up the price-to-rent ratio to levels not seen since the early 2000s.
“Despite the lag with which home prices will likely respond to the downturn, we see elevated risk of price corrections, which could prolong the downturn. Moreover, if workers lose bargaining power for remote work opportunities as the unemployment rate rises, COVID-related migration could reverse, which may exert downward pressure on home prices in areas that benefitted from the shift in work conditions” - Nomura
Upcoming Economic Calendar
(Data: Powered by our Financial Data Partner YCharts)
U.S Economic Calendar (Upcoming Data Points)
China Economic Calendar (Upcoming Data Points)
Analyst Team Note:
Unsurprising miss on U.S. existing home sales. The sharp rise in mortgage rates has scared off potential buyers.
“The imbalance between housing supply and demand remains severe, as the months’ supply of existing homes available for sale increased from 2.1 months to 2.3 months but remained significantly below pre-pandemic levels (3.9 months on average in 2019)” - Goldman Sachs
Will be watching Initial Jobless Claims, PMI readings, and UMich Consumer Sentiment closely.
Chart That Caught Our Eye
Analyst Team Note:
This chart from Goldman shows the wide distribution of outcomes for equities before and after peak inflation.
With data dating back to 1955, it’s clear the equities are up 12 months post peak inflation. The question now is, when does inflation peak?
Sentiment Check
We want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners and to inform my audience of the special features they have given that our online friends here closely follow Chinese Internet stocks (BABA/Tencent).
Much of Larry’s audience is concerned about the US ADR issue of Chinese Stocks being delisted.
Interactive brokers allows investors to buy HK-listed shares of Alibaba, JD, Tencent, and other brand name Chinese Internet companies on the HK market. This will effectively reduce any confusion or work you will have to do in case there is the event of delisting US ADRs
Make sure to check Larry’s most recent market updates via his personal newsletter. See you in our next update.
