Charts of the Week

Inflation heats up in food and transportation as Fed policy shifts

What the chart shows

This heatmap visualizes US Consumer Price Index (CPI) inflation trends over the past year, broken down by key categories and subcategories. Using a colour gradient based on Z-scores, it highlights the relative intensity of price changes within each category. Darker shades of red signal higher inflation compared to historical observations, while blue denotes easing pressures.

Behind the data

In November, inflation rose to 2.7% year-over-year, continuing its upward trajectory since the Federal Reserve began cutting interest rates in September in response to cooling prices. Key drivers of this uptick were surging prices in food categories – particularly meats and non-alcoholic beverages – and increased costs for apparel and public transportation. While shelter remains a significant contributor to overall inflation, its rate of increase moderated slightly, declining from 4.9% in October to 4.7% in November. These shifts underline persistent price pressures despite recent monetary easing.  

Bitcoin tops asset class rankings again

What the chart shows

This chart highlights the annual performance of 14 distinct asset classes over the past decade, ranking them from best to worst for each year. Each asset class is represented by the same colour, making it easy to track trends over time. The percentage figures beneath each asset class indicate its total annual return for the respective year, providing a quantitative measure of performance. This chart helps investors identify performance patterns, spot resilient assets and assess long-term relative returns.

Behind the data

Bitcoin has emerged as the top-performing asset in 2024, driven by a surge following Trump’s election victory. True to its reputation as a volatile and “binary” asset, Bitcoin claimed either the top or bottom spot in annual rankings throughout the past decade – it was the worst performer in 2022. This year’s strong performance highlights its high-risk, high-reward nature, maintaining its appeal as a speculative and growth-focused investment.

Sector weight harmonization narrows US-Europe valuation gap

What the chart shows

This chart compares the 12-month forward price-to earnings (P/E) ratios of the MSCI Europe and US indices against their counterparts adjusted for harmonized sector weights, aligned to the sector composition of the S&P 500. The comparison is shown over time to highlight how sectoral differences influence valuation metrics. This underscores the importance of accounting for sector composition when assessing valuation spreads between regions.

Behind the data

The P/E ratio is a key leading indicator for investors, but aggregated comparisons can be misleading without considering regional characteristics. In this chart, the standard P/E spread between the US and Europe is nearly 10%. However, when sector weights are harmonized to align with the S&P 500, the spread narrows to 6.5%. This adjustment highlights how the higher weighting of high-valuation sectors in the US skews standard comparisons, offering a more nuanced view of relative valuations.

AI boom drives gains in key sectors

What the chart shows

This chart compares the S&P 500's 2024 year-to-date (YTD) performance, best YTD performance, and historical maximum drawdowns (DD) by industry group. The analysis is presented in two panes: one showing market-cap weighted results and the other showing equal-weighted results.

Behind the data

By the end of 2024, market-cap weighted indices reveal strong rallies in the communication services, IT and consumer discretionary sectors. These gains are driven by economic resilience and excitement surrounding AI advancements, which have concentrated returns within a few leading stocks in these cyclical sectors.

In contrast, the equal-weighted indices tell a different story. Here, financials, industrials and utilities demonstrate better overall performance, highlighting the benefits of diversification. The relatively lower returns in the equal-weighted analysis for the top-performing market-cap sectors suggest their dominance stems from the outsized influence of a few large-cap stocks rather than broad-based strength.

Looking forward, uncertainties from economic and political developments could necessitate a more decisive focus on selection and diversification strategies. Investors may need to balance exposure to high-performing, concentrated sectors with more broadly diversified investments to navigate potential volatility effectively.

China's market cap exhibits undervaluation amid persistent challenges

What the chart shows

This chart compares the market capitalization of the MSCI China Index relative to the MSCI All Country World Index (ACWI), the MSCI Emerging Markets (EM) Index, and the MSCI All Country Asia excluding Japan (AxJ), which represents EM Asia. Each pane illustrates these ratios from 2006 to 2024, set against pre-pandemic linear 95% confidence bands. This chart helps identify when China’s market cap deviates significantly from historical trends, offering insight into potential over- or under-valuation.

Behind the data

After the pandemic, China’s stock market capitalization surged to excessively high levels but has been significantly undervalued since 2022 due to economic and policy challenges.

Earlier stimulus measures were questionable, but recent signals from  President Xi – pledging stronger policy support at the latest Politburo meeting and reaffirming the 5% GDP growth target for 2024 – have reignited optimism.

Looking ahead, expectations include monetary easing, fiscal expansion and real estate stabilization to bolster equity markets. While pre-COVID trends suggest upside potential for China’s market cap relative to these indices, lingering economic risks such as deflationary and property market instability temper expectations.

Santa Claus rally leaves the US dollar weak in December

What the chart shows

This chart examines the seasonal patterns of the US Dollar Index (DXY) using two panes:

1.  The upper pane displays the average monthly returns (month-over-month percentage change) for each calendar month. This shows the average performance of the DXY for all instances of each month since 1967, such as all Januaries, Februaries and so on. Positive returns are shown in blue, while negative returns are shown in red.

2.  The lower pane illustrates the frequency of negative monthly returns for each calendar month. Each bar represents the percentage of years since 1967 in which the DXY recorded a negative return for that month. Months with negative returns occurring more than 50% of the time are emphasized in purple, providing a clear view of persistent downside risks.

Behind the data

December has historically been the weakest month for the US dollar due to seasonal factors, market behavior and year-end economic patterns. As our analysis reveals, more than 60% of Decembers since 1967 have recorded negative returns, with an average monthly decline of -0.8%.

This trend is largely driven by the "Santa Claus rally," during which investors reallocate funds into equities and riskier assets in anticipation of strong market performance in the new year. This shift away from the US dollar – a traditional safe-haven asset – adds to its seasonal weakness in December.

In contrast, January tends to mark a rebound for the US dollar, with an average increase of 0.9%. Notably, negative performance occurs in only 35% of Januaries, highlighting a more consistent upward trajectory at the start of the year.

Bitcoin halvings reveal diminishing returns as currency matures

What the chart shows

This chart illustrates Bitcoin's cumulative returns and daily mining changes during each halving period. Halving events, which occur roughly every four years (most recently in April 2024), reduce the mining reward by 50% for validating a new block on the blockchain.  These events are programmed into Bitcoin's code to control the supply of new coins, ensuring scarcity and mimicking the finite nature of precious metals like gold.

Behind the data

Bitcoin halvings are integral to preserving scarcity and promoting mining efficiency, but they also highlight a distinct pattern in cumulative returns. Historically, following halving, Bitcoin’s price surges for several months to more than a year, declines significantly, and then stabilizes at a level near the initial surge.

However, over the past three halving cycles, cumulative gross returns have steadily declined – from over 5,000% with a 202% compound annual growth rate (CAGR) during the first block, to around 700% with a 66% CAGR in the third. For the current cycle, which began in April 2024, the cumulative gross return stands at around 150% with a 90% CAGR. While the post-halving pattern suggests potential volatility and growth, the trend of diminishing returns underscores Bitcoin’s maturation as an asset.

China powers ahead in EV sales but faces slowing growth

What the chart shows

This chart shows the monthly sales and year-over-year (YoY) growth trends of China's electric vehicles (EV), segmented into battery EVs and plug-in hybrid EVs. Fuel cell EVs, while included in the data, are not visible due to their low sales volumes. The upper pane shows absolute sales volume in millions, while the lower pane highlights YoY growth rates.

The chart aims to provide a view of the evolution of China’s EV market, including shifts in the contribution of different types of EVs to total sales and growth.  

Behind the data

Despite international curbs on Chinese EV exports, driven by concerns about potential unfair advantages from government subsidies, domestic EV sales have continued to expand. The upper pane reveals that BEVs remain the biggest contributor to China’s EV sales volume, though PHEVs are playing an increasingly significant role. China's share of the global EV market has risen to 76%, reinforcing its position as a global leader in EV adoption. 

However, the YoY growth rates have moderated over time, largely due to a slowdown in BEV sales, as the lower pane indicates. This deceleration reflects a maturing market and potential saturation in domestic demand for BEVs.  

US reduces dependence on Chinese tungsten

What the chart shows

This chart illustrates the shares of US tungsten imports by major supplier countries. It compares recent shares (12-month moving average as of August 2024) with those from three and five years ago, while also showing historical percentile ranges and median values for each country.  

This chart aims to highlight shifts in the US’s tungsten import dependencies and its efforts to diversify suppliers over time.  

Behind the data

Tungsten, also known as Wolfram, is a critical metal used in aerospace, defense and electronics applications, making it a strategic commodity in US-China trade relations.  The US has historically relied heavily on China for its tungsten supply, creating potential supply chain security vulnerabilities.  

Since the 2018 US-China trade war, the US has actively worked to diversify its tungsten imports. This effort is reflected in the chart, which shows declining import shares from China and rising contributions from alternative suppliers such as Canada and Germany.  

Trade tensions have also influenced tungsten markets, with the US imposing tariffs on Chinese imports and China restricting tungsten exports to the US. A tungsten mine reopening in South Korea, reported to have secured a long-term supply contract with the US, could help alleviate the situation.

China's credit slowdown signals challenges ahead for EURUSD

Leveraging Simon White's chart

What the chart shows

This chart shows the YoY growth of EURUSD (dollar per euro) and China's 12-month rolling sum of total social financing (TSF), a broad measure used to capture the total amount of financing provided to the real economy that serves as a critical indicator of credit and liquidity conditions in the Chinese economy.

The relationship is further explored by detecting a six-month lead of China’s credit growth ahead of EURUSD, shaded in grey to indicate the 95% confidence interval based on China’s loan growth trends.

This chart aims to shed light on the interplay between China’s credit dynamics and the EURUSD exchange rate, offering insights into potential future movements in the currency pair.

Behind the data

China remains one of Europe's top trading partners, with China being the EU's third-largest export destination and the EU holding the largest trade deficit with the country. A strengthening Chinese economy could boost demand for European imports, potentially lifting EURUSD. However, current economic conditions in China introduce uncertainties. 

This chart reveals a recent slowdown in China’s credit growth, with banks being the primary contributors while non-bank lending remains subdued. These developments may put downward pressure on EURUSD.

Southern Europe and France drive euro area growth

What the chart shows

This chart shows the annual GDP growth of the Euro Area 20 (which includes Croatia’s membership from January 2023) from Q3 2010 to a projection in Q1 2025. The bars represent contributions of different regions – Germany, France, Northern Europe (northern euro area) and Southern Europe (southern euro area) – while the orange line tracks total GDP growth for the euro area.

Behind the data

Economic performance in the euro area has been uneven, reflecting disparities in inflation levels and growth dynamics across member states. Inflation peaked at 25% in some Southern European economies while remaining as low as 6% in others. As inflationary pressures ease and the European Central Bank pivots to rate cuts, GDP growth is being led by Southern Europe and France. In contrast, Germany and Northern Europe are grappling with negative annual GDP growth, underscoring the challenges facing the bloc’s industrial and export-driven economies.  

Tech stocks lead market volatility while financials stabilize

What the chart shows

This chart illustrates the Beta coefficient (β) for all S&P 500 sectors over time, using a one-year rolling calculation. The Beta coefficient measures a sector’s volatility relative to the overall market, typically represented by the S&P 500, which has a beta of 1.0.

A beta higher than 1.0 indicates that the sector is more volatile than the market, often reflecting a greater sensitivity to market movements.

A beta lower than 1.0 suggests less volatility, characteristic of more defensive sectors that provide stability during market fluctuations.

In our analysis, we highlight the betas of the Information Technology and Financials sectors for comparison, while the betas of other sectors are shown in grey for context.

Behind the data

The ongoing rally in the “Magnificent 7” group – led by companies such as Tesla and Nvidia – has positioned the Information Technology sector as the most volatile relative to the broader market, represented by the S&P 500. This heightened volatility mirrors patterns seen during the dotcom bubble of 1998–2001, though it is still too early to confirm similar systemic risks.

In contrast, the Financials sector appears to have tempered its volatility, now exhibiting a beta lower than 1.0. This suggests a divergence in market dynamics: while high-growth tech stocks are dominating market movements, financial stocks remain relatively stable, reflecting subdued volatility and a focus on steady performance amidst changing market conditions.

Trade surpluses fail to boost EM currencies despite positive link

What the chart shows

This scatter chart shows the relationship between emerging-market (EM) trade balances with the US (as a percentage of GDP) and the corresponding currency performance against the USD over the last 12 months. It also displays a cross-EM exponential trend line, with a 95% confidence band illustrating the range of expected variations around the trend.

The chart aims to explore how trade dynamics between EM economies and the US correlate with currency movements. For example, the Thai Baht (THB) and Taiwanese Dollar’s (TWD) position on the far right of the chart reflect large trade surpluses with the US, yet their flat currency performance against the USD suggests other dominant factors at play.

Behind the data

EM foreign exchange (FX) rates are typically shaped by a combination of capital flows, policy rate differentials and global risk appetite. However, international trade activity could also play a significant role. This chart indicates a positive trend over the past year between cumulative goods trade balances with the US and EM currency performance against the USD. However, the expected direct link between trade balance surpluses and FX appreciation has been muted, probably due to the Federal Reserve’s hawkish monetary stance, which bolstered USD strength and overshadowed trade-driven currency adjustments. The inclusion of a 95% confidence band further emphasizes that while a trend exists, significant variability arises from other factors impacting EM currencies, such as shifts in risk sentiment or local economic challenges.

Looking into 2025 and beyond, the interplay between monetary policy normalization and broader geopolitical and trade dynamics may redefine this relationship. Should the Fed pivot toward monetary accommodation, EM currencies could experience reduced pressure from a strong USD. Additionally, lingering impacts of tariffs introduced during the new Trump administration may continue to impact EM trade balances and FX trends.

Nvidia’s market value surpasses entire developed markets in AI boom

What the chart shows

This chart compares Nvidia's market capitalization to the total market cap of eight selected developed markets, tracked monthly from January 2023 to the present. Each cell represents the total market value of a given country or region, as measured by the MSCI All Cap index. A transparent overlay within each cell highlights the proportion of Nvidia's market cap relative to the country's total market size, turning into a solid colour when its market value exceeds the total for that market. This chart highlights the remarkable rise of the US semiconductor company renowned for graphics processing units (GPUs) that power AI technologies.

Behind the data

Nvidia's extraordinary growth amidst the AI-driven boom has turned it into the largest company in the world by market value. Its market cap first surpassed the combined total of Italy, Spain and Portugal in May 2023. By January 2024, the company had overtaken the total market sizes of Australia, Germany and the Nordics. By June 2024, it had surpassed even the United Kingdom for the first time, one of the world’s biggest developed markets. Nvidia's valuation growth underscores the growing dominance of mega-cap technology companies amid speculation and enthusiasm over the transformative potential of emerging technologies like AI.  

Spotting mispriced assets with macro-driven insights

What the chart shows

This table, created using Quant Insight’s (QI) macro fair value model, examines the relationship between asset prices and macroeconomic drivers. It highlights whether the prices of various securities and FX pairs are aligned with their macro-driven fair value, and the extent of any deviation.  

The first two columns show the spot price and the model-derived fair value price. The third column, colour-coded with green for undervalued and red for overvalued assets, quantifies the fair valuation gap (FVG). The fourth column tracks this gap in terms of the degree of overvaluation or undervaluation. The final column shows the R² value, which measures the degree to which macroeconomic factors explain price movements. An R² above 65 indicates strong macroeconomic influence, providing confidence in the model’s validity.

Behind the data

Several insights emerge from this analysis: EUR/USD and aluminium may look like an attractive trade, as they are priced significantly below fair value. But their R² values hover around 50, indicating price movements are likely influenced by factors such as momentum or market sentiment rather than macroeconomic drivers.

On the other hand, GBP/USD and Hang Seng Index both show R² values around 70 and FVG exceeding 1.5 standard deviations, making them attractive candidates for further exploration, particularly after accounting for trading cost. Investors can use this table to identify and prioritize assets for potential trading strategies based on valuation gaps and the influence of macroeconomic conditions.

Are risk-adjusted metrics overstating market performance

What the chart shows

This scatter plot compares the Sharpe ratio and Sortino ratio of major country and region equity indices, with the size of each bubble representing the returns of each index. The Y-axis shows the Sharpe ratio, calculated using the 10-year annualized excess return over 10-year government bonds divided by standard deviation. The X-axis shows the Sortino ratio, which uses the same numerator, but considers only downside risk in its denominator. The green reference line marks where the Sharpe ratio equals the Sortino ratio, providing a benchmark for comparison. This chart provides context for evaluating the relative performance of equity indices and the importance of considering both metrics for a fuller picture of risk-adjusted returns.

Behind the data

Both the Sharpe and Sortino ratios are widely used measures of risk-adjusted returns, with higher values indicating better performance relative to risk. However, the two ratios differ in how they treat volatility:  

• The Sharpe ratio uses total volatility (both upside and downside) in its denominator, treating all fluctuations as negative for returns.
• The Sortino ratio, on the other hand, focuses only on downside risk, recognizing that upside swings are desirable to investors.  

By comparing the two ratios in a scatter plot, we can observe that several developed markets fall above the green line, where the Sharpe ratio exceeds the Sortino ratio. This suggests that the Sharpe ratio may overstate the risk-adjusted performance by penalizing positive volatility alongside negative. The Sortino ratio offers a more nuanced view, particularly for investors more concerned with downside risks.  

Hong Kong office market struggles with record vacancies and falling rents

What the chart shows

This chart tracks trends in vacancy rates and rental prices for commercial office spaces in Hong Kong’s Central business district, broken down into Grade A, B, and C office categories. The data reveals a significant surge in vacancy rates across all office grades since the pandemic, coupled with a pronounced decline in rental prices. Despite some fluctuations, there are no clear signs of recovery in either metric, underscoring the ongoing challenges faced by Hong Kong’s commercial real estate market.

Behind the data

Hong Kong’s economy continues to struggle to regain its pre-pandemic momentum, compounded by several structural and economic challenges:  

• Corporate outflows: Numerous corporations left Hong Kong following the pandemic. Grade A office spaces have reached a record high vacancy rate of 16.4%, with Grade B spaces close behind at 15%.  
• Mainland China’s real estate crisis: This has dampened consumer confidence, further weakening demand and driving down rental prices.  
• Management challenges: Cost-cutting measures by property managers and bankruptcies among landlords have resulted in deteriorating building maintenance and increased dissatisfaction among tenants, further exacerbating vacancies and falling rents.  

These trends reflect not only the broader economic uncertainty but also a structural shift in demand for office spaces, with businesses downsizing or seeking more affordable options.  

Is Europe heading for another gas crisis?

What the chart shows

This chart highlights seasonal trends in European gas inventories, showing historical and forecasted storage levels. The blue line represents 2024 data, including forecasted values derived from seasonal patterns observed over the past five years. The purple line indicates the median storage level, while the green shaded area represents the 25^th to 75^th percentile range of storage levels. Grey shaded areas denote the historical highs and lows since 2016. This visualization shows how current gas storage compares to historical trends and projected levels to provide insight into Europe’s energy supply dynamics.

Behind the data

European gas markets are navigating heightened uncertainty amid ongoing geopolitical and weather-related challenges:  

• Price dynamics: Dutch TTF gas prices surged nearly 20% in November, driven by colder temperatures and reduced wind energy output.
• Storage levels: Europe's gas reserves dipped below 90% for the first time in 2023, raising concerns about winter supply.
• Geopolitics: The Russia-Ukraine conflict continues to strain energy supplies, compounded by Gazprom's recent suspension of gas deliveries to Austria.  

Looking ahead, projections from Goldman Sachs suggest TTF prices could spike to €77/MWh in extreme scenarios, with storage levels potentially dropping to 40% by the end of March 2025 compared to 53% in March 2024. Based on the five-year seasonal pattern, this chart projects storage levels to fall to 44% by the end of March 2025.  

How partisan politics shape US consumer sentiment

What the chart shows

This chart illustrates consumer sentiment trends in the US by political affiliation using data from the University of Michigan. We can see how sentiment shifts dramatically between presidential transitions, reflecting partisan reactions. For example, when Joe Biden took office in 2021, Democratic sentiment surged from 67.5 to 96, while Republican sentiment dropped sharply from 100.7 to 58.5. A similar, opposite trend occurred in 2016 after Donald Trump’s first election.  

Behind the data

This chart highlights the polarization of US politics, where consumer sentiment is strongly influenced by partisan alignment with the presidency, rather than by material changes in the macroeconomic environment. Consumer sentiment increases significantly among those whose political party holds the presidency, while it declines for the opposing party. While sentiment among Independents shows less dramatic swings, their index generally follows the broader economic and political climate. Looking ahead to 2025, a similar flip in sentiment is likely when Trump returns to the presidency. This polarization highlights the challenge of disentangling genuine economic perceptions from partisan biases in consumer data.  

Trump’s Strategic Bitcoin Reserve: What could have been

What the chart shows

This chart simulates the performance of a hypothetical Strategic Bitcoin Reserve (SBR) had it been established on Donald Trump’s first inauguration day in January 2017. The reserve assumes an annual purchase of 200,000 bitcoins, totaling 1 million BTC over five years, with approximately 548 BTC acquired daily. The SBR’s growth is segmented into five annual tranches, each corresponding to the performance of Bitcoin investments made during a specific year. A dotted vertical line marks the proposed starting point of the reserve, and shaded areas represent the performance of different tranches over time. As of September 2024, the simulated reserve has grown to US$86.8 billion.

Behind the data

The concept of a Strategic Bitcoin Reserve, proposed by Trump during his 2024 presidential campaign, has stirred significant debate. Proponents suggest that such a reserve could serve as a hedge against inflation, diversify national reserves and position the US as a leader in the evolving digital economy. Critics, however, point to Bitcoin’s high volatility, the risk of public fund losses and the uncertainty surrounding the long-term viability of cryptocurrencies as reserve assets.

In this simulation:  

• 2017-2020: Had the reserve been established during Trump’s first term, its value would have reached approximately US$38 billion by 2021, despite Bitcoin's significant price volatility.
• 2021-2023: A sharp decline in Bitcoin prices during 2022 led to a temporary dip in the reserve’s value.
• 2024: Renewed investor interest in the crypto market spurred a strong recovery, doubling the reserve’s hypothetical value since its completion in 2021.

This simulation underscores Bitcoin’s potential for significant returns, but highlights the inherent risks and volatility of incorporating cryptocurrencies into strategic reserves. It also reflects broader market trends and the potential implications of large-scale national adoption of digital assets.

Semiconductor valuations soar amid growth hype

What the chart shows

This table displays MSCI World valuations across industries, measured by key financial metrics: trailing price-to-earnings (P/E) ratio, 12-month forward P/E ratio, price-to-book (P/B) ratio and dividend yield. Each metric is colour-coded according to 15-year Z-scores, ranging from blue (indicating lower valuations) to red (indicating higher valuations.) Industries are ranked by their average Z-scores, providing a comparative view of relative over- and undervaluation.

This metric provides a normalized view of valuations relative to historical benchmarks, helping investors and analysts identify areas of potential overexuberance or overlooked opportunities.

Behind the data

As of November the semiconductor industry stands out as the most overvalued sector, driven by high trailing P/E and P/B ratios – both exceeding two standard deviations above the historical average. This overvaluation may reflect heightened investor expectations, fueled by strong demand from high-growth areas such as artificial intelligence and electric vehicles.  

Conversely, industries such as food products, beverages, personal care and automobile components appear undervalued, potentially due to their perception as mature, lower-growth sectors.

US-European stock divergence driven by tech

What the chart shows

This chart compares the performance of the S&P 500 and STOXX 50 indices, along with the relative performance of S&P 500 Information Technology to STOXX Technology, before and after the Global Financial Crisis (GFC). The indices are rebased to the end of 1989 for pre-GFC comparisons and the end of June 2009 for post-GFC comparisons. The purpose of the chart is to highlight the divergence in equity performance between the US and Europe, particularly in the technology sector – underscoring the pivotal role of technological innovation in driving equity markets.

Behind the data

Before the GFC, US and European stock markets experienced broadly similar growth trajectories. However, post-GFC, US equities, particularly in the tech sector, outpaced European ones. Key factors include:

• The US has consistently led tech innovation, evidenced by its higher rates of patent grants and the dominance of major US tech companies globally.
• The US recovery after the GFC was supported by sizeable fiscal and monetary policies, whereas Europe faced prolonged challenges stemming from the European sovereign debt crisis.
• The S&P 500 has a higher weighting of technology stocks, which have been major growth drivers since the GFC. Meanwhile, although the STOXX 50 has a notable tech weight, it is more focused on traditional sectors like consumer, industrial, and finance. Additionally, European tech stocks have underperformed compared to the US due to differences in innovation and market dynamics.

While the US maintains its lead, Europe has taken a more regulated approach, emphasizing consumer protection, transparency and sustainable innovation. This environment may help Europe close the gap with US tech over time, balancing growth with accountability.

How the S&P 500 has grown across generations

What the chart shows

This chart visualizes the cumulative performance of the S&P 500 segmented by population generations, measuring returns up to the point when the average member of each generation reaches 20 years old. Cumulative annual growth rates (CAGR) are calculated using the midpoint of generational birth ranges, as defined by the Pew Research Center. For instance, Generation Y (Millennials) includes individuals born between 1981 and 1996, with a midpoint of 1989. Each generation is represented by a distinct colour; the shaded areas beneath emphasize generational differences in market returns. This chart serves to highlight long-term market trends and generational economic contexts, offering insight into how cumulative market growth reflects broader economic expansion over time.

Behind the data

In 2024, the average member of Generation Z (Zoomers) reached 20 years old, by which time the S&P 500 had delivered a cumulative return of 430% for investments made at the time of their birth. This growth mirrors levels seen during the dot-com bubble and just before the GFC - periods that defined the childhood and teenage years of Millennials. This chart underscores a striking pattern: with each new generation, the US stock market has reached higher cumulative levels, reflecting robust long-term economic growth and market expansion. However, these high-growth periods also coincide with subsequent economic corrections, reminding us of the cyclical nature of markets and the importance of understanding historical contexts in evaluating generational investment performance.

Tesla leads Magnificent 7 valuation gaps amid speculation on Trump impact

What the chart shows

This table leverages Quant Insight's Macro Factor Models to evaluate the stock prices of the “Magnificent 7” against various macroeconomic indicators. By comparing actual stock prices to model-derived fair values, it identifies which stocks are currently undervalued or overvalued.  

Key metrics include:

• Actual price: The current market price in USD.

• Model value: The price derived from Quant Insight’s macro models in USD.

• Percentage gap (5-day MA): The difference between the actual and model price as a percentage, smoothed over a 5-day moving average.

• Fair valuation gap (Standard deviation): A measure of how far the stock's price deviates from its model value, in standard deviation units.

• Model confidence (R-squared): The strength of the model’s predictive accuracy, where higher values indicate greater confidence in the valuation estimates.

Behind the data

Tesla is currently the most overvalued stock in the Magnificent 7, reflecting heightened investor speculation, which earlier this month was fuelled by optimism surrounding Elon Musk's influence on President-elect Donald Trump’s administration. In contrast, the valuations of other companies in the group remain closer to their fair values, with smaller gaps in both percentage terms and standard deviations. This suggests that macroeconomic conditions have a more neutral impact on these companies.

Dollar positioning and DXY performance reflect mixed market sentiment

What the chart shows

This chart presents non-commercial dollar positioning across various foreign exchange (FX) rates alongside the quarterly performance of the DXY index, a measure of the US dollar’s value against a basket of major currencies. It provides a visual representation of how speculative market positioning and dollar index performance have evolved over time.

Behind the data

Since the US election, forex have shown unexpected mixed patterns, with the USD experiencing a notable surge. This increase was driven by investor apprehensions over tariffs, trade wars and rising bond yields, leading to a reassessment of expectations for US rate cuts. The euro and the Mexican peso were particularly impacted, each declining by approximately 2.8%.  

Despite the dollar’s strength, speculative positioning reflected a mixed outlook. Gross USD long positions against eight International Monetary Market (IMM) futures contracts remained steady at USD17.5 billion, suggesting hesitancy around further dollar appreciation. This stability reflected offsetting movements, such as speculators covering short positions in the euro and sterling, which reduced overall short exposure by USD1.9 billion and USD0.9 billion, respectively. Meanwhile, net selling pressure concentrated on the Japanese yen and the Canadian dollar. Interestingly, the Dollar Index shifted to a net short position of 2,322 contracts—a level not seen since March 2021. This suggests market participants are exercising caution, balancing concerns over the dollar’s recent strength with skepticism about its continued rise.

Falling job quits eases pressure on the Fed

What the chart shows

This chart highlights key labour market dynamics and their implications for inflation and monetary policy. The navy line represents the three-month moving average of the Federal Reserve Bank of Atlanta’s median nominal wage growth, while the green line tracks the US job quits rate shifted nine months ahead. The semi-transparent navy line illustrates predicted nominal wage growth based on the quits rate, accompanied by a shaded 95% confidence interval for the prediction. A dotted line at about 2.25% marks the pre-GFC average nominal wage growth, capturing a historical inflationary baseline.  

By visualizing this predictive relationship, this chart shows how changes in job quits—a proxy for worker confidence and mobility—can influence wage growth. This, in turn, sheds light on future labour market trends, inflation dynamics and the potential trajectory of Federal Reserve (Fed) monetary policy.

Behind the data

Declines in the job quits rate signal shifting labour market conditions that may lead to slower wage growth. Lower quits could reflect reduced worker confidence, limiting their ability to negotiate higher wages or seek better-paying opportunities. Increased labour force participation also increases the labour supply, easing wage pressures.  

These factors collectively stabilize employment conditions and costs. In the current US context, the decline in quits suggests nominal wage growth may drop below 4% in the coming months. This projection aligns with a potential loosening of the Fed policy, as slower wage growth could reduce inflationary pressures, giving the Fed room to ease monetary conditions.

China’s tightening financial and monetary conditions weigh on credit growth

What the chart shows

This chart illustrates the relationship between China's financial and monetary conditions and total loan growth from 2011 to 2025. The YiCai Financial Conditions Index captures variables such as interest rates, sovereign term spreads, interest margins and asset prices. The Monetary Conditions Index is derived using principal component analysis (PCA) and incorporates key indicators including loan prime rates, the reserve requirement ratio (RRR) for large banks, lending rates and government bond yields.  

By visualizing the interplay between these metrics, the chart highlights how China’s financial and monetary factors influence credit growth and, by extension, the broader economy. It helps contextualize the effectiveness and trajectory of policy interventions, shedding light on the challenges China faces in balancing economic stability with growth.

Behind the data

Since the GFC, China’s financial and monetary supports have gradually decreased, as reflected in the year-over-year changes in financial and monetary conditions. This trend aligns with the moderation in overall credit growth, shown by the downward trajectory of the blue line. Recent economic developments suggest that China's policy adjustments have become more cautious, with skepticism surrounding the effectiveness of large-scale stimulus. This underscores the challenges in sustaining robust growth amid global uncertainties and structural transitions.

Post-election market winners and losers: Bitcoin surges, safe havens slip

What the chart shows

This table provides a comparative view of the performance of key asset classes from 4 November to 13 November, capturing the immediate market reaction to Donald Trump’s election victory on 5 November. Asset classes are categorized by percentage changes, highlighting the top-performing and underperforming segments.

Behind the data

Trump’s victory triggered significant rallies in certain asset classes, led by Bitcoin, which surged to a new all-time high as renewed optimism in digital assets drew investors to cryptocurrencies. US equities also reacted positively, with small-cap stocks outperforming as investor optimism favoured growth-focused domestic assets. This highlights optimism in sectors more closely tied to the US economy, reflecting expectations that Trump’s policies could favour domestic industries.  

In contrast, traditional safe-haven assets such as gold, crude oil and emerging market (EM) equities saw declines. Gold faced selling pressure as investors reallocated toward higher-risk assets expected to benefit from potential growth-friendly policies. Crude oil’s decline mirrors similar investor shifts. Chinese and European equities also underperformed, a sign of apprehension over potential trade realignments and economic impacts stemming from renewed US policies.  

USD strengthens post-election, echoing 2016 gains against global currencies

What the chart shows

This chart tracks the performance of the US dollar against a range of global currencies following the US presidential elections in 2016 and 2024. It compares the one-, two-, and three-month performance after Trump’s 2016 victory with the post-election reaction this year. Shaded areas indicate the range of USD strength during the initial three-month period following the 2016 election, providing a historical benchmark against which current movements can be assessed.  

Behind the data

Following Trump’s 2016 victory, the USD Index experienced a steady rise, fueled by expectations of tax cuts, growth-focused policies and heightened geopolitical tensions that increased demand for the dollar. The currency’s strength was particularly notable against the Turkish lira (TRY) and Mexican peso (MXN), reflecting regional uncertainties and the prospect of potential trade disputes.

This year, a similar trend of USD appreciation is emerging as markets respond to anticipated policy shifts under Trump’s leadership. The dollar strengthened broadly in the days following the election. While initial gains are strong, the duration of this rally may depend on future macroeconomic variables such as interest rate differentials and growth expectations, which could alter dollar movements as 2025 approaches.  

Major coins outshine Altcoins amid post-election crypto rally

What the chart shows

This chart compares the performance of two composite indexes in the crypto market: the Major Coin Composite Index and the Altcoin Composite Index. The Major Coin Composite includes cryptocurrencies with a market cap exceeding 1% of the total crypto market, while the Altcoin Composite represents those with a market cap below 1%. To improve comparability, the data was standardized and smoothed over a one-week period. This chart highlights the diverging performances of major and smaller-cap coins, particularly around key market events and regulatory developments.

Behind the data

Trump’s election victory triggered a post-election wave of euphoria in the crypto market, led by high-profile coins like Bitcoin and Dogecoin, which captured much of the spotlight as investors redirected funds towards these major assets. This shift toward major coins had been developing since early 2023, driven by a cooling crypto market and regulatory shifts, such as the SEC's approval of spot Bitcoin ETFs.  

Historically, altcoins have been highly volatile and even occasionally outperformed major coins, as seen during the 2022 crypto rally. But the trend reversed in 2023, as broader market slowdowns and changing investor sentiment favoured more established cryptocurrencies. Trump’s re-election further amplified this trend, with major coins reacting more strongly than altcoins in the recent post-election rally.

VIX and MOVE indexes fall as markets stabilize post-election

What the chart shows

This chart compares equity volatility (VIX index) and bond market volatility (MOVE index) following Trump’s victory, showing how volatility in both types of securities has shifted in response to the US election outcome.

Behind the data

Trump’s decisive victory removed a major source of uncertainty from the stock market, resulting in a drop in the VIX index, a.k.a. the market’s "fear gauge." Last Thursday, the VIX dropped to 15.20 and has since fallen further, dipping below 15, indicating reduced risk perceptions among equity investors. The MOVE Index provides a complementary view, showing how both equity and bond market investors are adjusting their expectations in the post-election environment.

US-China tensions reshape global trade flows

What the chart shows

This chart displays shifts in regional market shares for US imports and Chinese exports from 2018 to the present, covering the period when tariffs and trade tensions between the US and China intensified. It is designed to show how the US-China trade war and other geopolitical factors have influenced global trade flows.  

Behind the data

The US-China trade war has reshaped global trade patterns, driving notable shifts in the market shares of US import sources and Chinese export destinations. These changes reflect adjustments made by countries and businesses in response to tariffs and geopolitical risks, with many countries realigning their trade relationships accordingly. Since 2018, China’s share of US imports has declined by more than five percentage points to 12.2%, while Chinese exports to the US have decreased by over 2.5 percentage points to 15.5%. At the same time, other regions, particularly ASEAN (Association of Southeast Asian Nations), have seen increased shares in both US imports and Chinese exports, indicating their growing role in global supply chains.

Slowbalization: Global trade openness stalls and growth slows post-GFC

What the chart shows

The chart provides a long-term view of global trade openness and trade growth from 1970 to the present. The top pane displays global trade openness, highlighting the average levels from 2010 to 2017 and from 2018 to the present. The bottom pane shows global trade growth, comparing trends before and after the Global Financial Crisis (GFC) and the US-China trade war.

Behind the data

The end of the Bretton Woods system in the 1970s marked the start of a more market-driven exchange rate era. During this period, trade liberalization expanded, particularly in emerging markets where trade barriers were gradually lowered. These developments fostered greater economic integration, leading to a steady rise in global trade openness and annual trade growth rates averaging around 10%.

However, since the GFC, trade reforms have slowed, influenced by US-China trade tensions and other geopolitical conflicts. This has led to increased regionalization and slower growth – a phenomenon often referred to as “slowbalization.” The trend reflects a move away from rapid globalization toward more regionally focused trade networks, with global trade openness stagnating and trade growth slowing since 2018.  

China outpaces the US in global innovation race

What the chart shows

This chart displays granted patents from the World Intellectual Property Organization since 1986, with shaded areas representing the share of patents granted to each region or country. In 2023, China accounted for nearly 46% of all patents granted globally, a figure nearly three times that of the US at 15.7%. In other words, out of about 2 million patents granted worldwide, 920,000 were awarded to China – reflecting the country’s increasing prowess in innovation, research and technology.  

Behind the data

China has emerged as a leading source of innovation, with patent activity surging over the past 20 years due to heavy investment in research and development. China’s R&D budget has grown 16-fold since 2000, according to The Economist, and its emphasis on fields such as biotechnology, quantum computing, telecommunications and artificial intelligence has propelled it to scientific prominence. This intense focus on intellectual property comes as the US and China intensify a technological arms race, where control over patents and proprietary technologies will be critical in securing leadership in cutting-edge industries.  

How US stocks react to presidential elections

What the chart shows

This two-panel chart shows the historical performance of the S&P 500 from Election Day through Inauguration Day and into the early days of each new US administration. The top panel shows market trends when a Republican candidate wins, with shaded red and pink areas above and below to indicate variability in performance. The lower panel mirrors this for Democratic victories. By charting these periods, we can observe any patterns or anomalies in market response based on the winning party.  

Behind the data

A central question during presidential elections is how the stock market would react to the outcome. For example, following Trump’s election in 2016, Bitcoin, equity futures and the US dollar experienced notable increases. This chart takes a broader view, focusing on market performance not only in the days immediately following the election, but also through the first 75 trading days of a new administration. Historically, when Republicans assume office, the S&P 500 has often shown an initial uptick until Inauguration Day, sometimes followed by a modest correction. Will history repeat itself this time around?

US mortgage rates heat up

What the chart shows

This heatmap illustrates the monthly average 30-year fixed mortgage rate in the US based on Freddie Mac’s weekly data series. Each cell represents the rate from the final week of each month, spanning from 2000 to 2024. The color gradient, from light blue to dark red, shows the Z-score of these rates, visually highlighting periods of exceptionally low or high mortgage rates. ‍

Behind the data

After the Great Financial Crisis, interest rates reached all-time lows, with US mortgage rates following suit. Between 2012 and 2021, the 30-year fixed mortgage rate remained near historic lows due to prolonged low-rate policies. However, post-pandemic economic recovery and the Federal Reserve's aggressive rate hikes subsequently pushed mortgage rates sharply higher. With ongoing inflation concerns, geopolitical tensions and burgeoning US debt, it is unlikely that mortgage rates will return to pre-pandemic lows. Instead, we may be entering a period where rates resemble levels seen in the early 2000s.  

UK-Germany bond yield gap hits 20-year high as economic risks diverge

What the chart shows

This chart compares the yield-to-maturity of 10-year government bond benchmarks for the UK and Germany from 2005 to present. The top panel shows the yield levels for each country, while the bottom panel illustrates the yield spread between the two, capturing the difference in yields over this period.

Behind the data

The recent UK budget release triggered a sharp market reaction, causing the pound to drop sharply and pushing UK gilt yields higher. Meanwhile, Germany faced its own headwinds, including sluggish growth and energy constraints.

Since early 2023, the spread between UK and German 10-year bond yields has widened significantly, reflecting diverging perceptions of economic and fiscal stability. Currently at a 20-year high, this spread suggests that investors see increased economic risk in the UK relative to Germany, pricing in expectations of higher inflation, fiscal strain and potential currency pressure specific to the UK’s outlook.

Global stock valuations show wide gaps as economic pressures mount

What the chart shows

This table displays MSCI ACWI Index valuations by country across multiple metrics: trailing price-to-earnings (P/E) ratio, 12-month forward P/E ratio, price-to-book (P/B) ratio, and dividend yield. Each metric is color-coded based on 15-year z-scores, with colors ranging from blue (indicating lower valuations) to red (indicating higher valuations.) Countries are sorted by their average z-scores, providing a comparative view of relative over- and undervaluation.

Behind the data

As of October 2024, stock markets in Taiwan, the US, India and Australia show notable overvaluation, driven primarily by P/B ratios above two standard deviations. While earnings growth has slowed, the prominence of AI may continue to support high US valuations without necessarily forming a bubble. Indian equities, on the other hand, face headwinds from weaker earnings and capital outflows. At the opposite end, Mexico, Colombia and Hungary appear undervalued, thanks to attractive dividend yields and lower P/E ratios. These valuation differences offer insights that can help guide equity allocation and country selection within global portfolios.

Dollar dominance faces new challenge

What the chart shows

This table visualizes the share of various currencies in global payments processed via the SWIFT system, displaying data from the past three months (September, August and July 2024). It also shows each currency’s highest and lowest recorded share over the past 10 years, the position of the latest observation within the interdecile range (10th-90th percentiles), and historical averages, including mean and median values.

Behind the data

In August, the US dollar’s share in global payments reached a record high, briefly raising expectations that it might soon exceed the 50% threshold. However, the currency’s share settled back to around 47%. Despite ongoing talk of the dollar’s potential decline, partly fueled by talks of a proposed BRICS (Brazil, Russia, India, China and South Africa) currency, the data reveal a different trend: the USD's recent dip has not been absorbed by the Chinese yuan, as some expected. Instead, other developed market currencies, such as the euro, British pound and Japanese yen, have seen slight increases, reflecting their ongoing role in global transactions.

Rising Middle East tensions threaten global trade and energy supplies

What the chart shows

This chart tracks trade volume and tanker transit activity through the Strait of Hormuz from May 2019 to September 2024. It highlights the sharp drop in trade flows following disruptive events including the recent conflicts and attacks in the Middle East.

Behind the data

The Strait of Hormuz is a critical chokepoint for global oil supply, facilitating nearly a quarter of the world’s daily oil exports. This narrow waterway, located between Iran and Oman’s Musandam Peninsula, is vital for connecting Middle Eastern oil producers with international markets. Amid escalating tensions and conflict in the region, the risk of disruption in the strait has increased, which could drive up global energy prices and shipping costs and delay supply. Any significant obstruction here would have far-reaching consequences for global oil and gas markets, underscoring the Strait of Hormuz’s strategic importance in the current geopolitical landscape.