China’s fiscal surge, US election uncertainty, space sector growth and ESG's long-term potential

China’s credit surge may struggle to fuel growth

What the chart shows

The chart tracks China’s credit impulse (a measure of new credit as a share of GDP) offset by three months to align with the Li Keqiang Index, which measures total bank loans, electricity consumption and rail cargo volume. This reflects the strong five-year rolling correlation between the two measures.

Behind the data

China has rolled out fiscal measures, including bond issuances worth 6 trillion yuan ($850 billion), following earlier monetary steps. This move is expected to inject liquidity into the economy, possibly pushing the credit impulse into positive territory and spurring economic activity. However, with economists voicing doubts about the country meeting its 5% GDP growth target as we enter Q4 2024, the effectiveness of these measures remains in question.

Rocketing toward long-term gains

What the chart shows

This chart compares the performance of the MSCI Space Explorer Index, which tracks companies in the space exploration industry, against the broader MSCI IMI (which includes large, mid and small-cap stocks), particularly after key space missions. The aim is to assess how space-related milestones influence market sentiment compared to general market performance.

Behind the data

SpaceX’s successful Starship test flight, where the Super Heavy booster was recovered using mechanical arms, marks a significant step toward rocket reusability – a development that could revolutionize space travel economics. The heatmap shows how various space missions have led to mixed reactions in the space exploration sector, with notable market fluctuations. With each new milestone, investors are increasingly evaluating whether this sector is poised for long-term growth or if challenges like regulatory hurdles and cost efficiencies will temper enthusiasm.  Here is an alternative visualization of the chart:

Polling vs betting: Can Harris hold her lead in critical swing states?  

What the chart shows

This chart compares polling data from 14 swing states with betting odds, providing a snapshot of the US election race. The left column shows polling averages from FiveThirtyEight, while the right column presents Polymarket betting odds. For example, a 62.6% polling figure for Kamala Harris in in California indicates that of the votes cast between her and Donlad Trump, Harris is expected to win 62.6%. Both major candidates typically poll slightly lower overall in each state as third-party candidates capture a small portion of the vote. To simplify the chart, potential third-party votes have been excluded.

Behind the data

The US election is shaping up to be decided by a few critical swing states, with Pennsylvania, Michigan, Wisconsin, and Nevada showing the tightest contests, according to Polymarket odds.  Although Harris holds a polling lead in these states, betting markets still slightly favor Trump, reflecting his past outperformance of polling predictions. This gap between polling data and market odds suggests that investors are factoring in historical trends more heavily than current polls.  

ESG vs energy: How regional differences shape risk-adjusted returns

What the chart shows

This chart compares the 10-year Sharpe ratios – a measure of risk-adjusted returns – of ESG stocks (MSCI ESG Leaders Index) and energy stocks (MSCI Energy Sector Index) across developed markets including Australia, Canada, Europe, Japan, the UK and the US.

Behind the data

ESG stocks are often seen as aligning with broader social and environmental goals, but how do they perform against traditional energy stocks? To explore this, we analyzed the risk-adjusted returns of ESG stocks versus counterparts in the fossil fuel sector using the 10-year Sharpe ratio.

In markets like Australia, Canada, Europe and the US, the ESG leaders have outperformed traditional energy stocks, demonstrating their potential for both ethical and financial returns. However, in Japan and the UK, oil and gas stocks have delivered comparable or even superior risk-adjusted returns, highlighting how regional factors such as energy policies and market structures can influence investment outcomes.  

Can innovation drive profits? The link between R&D spending and earnings

What the chart shows

This scatter chart examines the relationship between R&D spending and earnings per share (EPS) across 23 developed and emerging markets over the past decade, highlighting how investments in innovation can drive profitability.

Behind the data

Our analysis reveals a positive correlation between higher R&D spending and EPS, particularly in markets like the Netherlands, the US and Denmark, where sustained innovation investment has contributed to robust profit growth. However, Switzerland, despite similar levels of R&D investment, has seen lower earnings, indicating that that heavy spending on innovation alone doesn’t always guarantee success. Greece, with historically weak earnings, likely reflects the impact of low innovation investment, through broader economic factors also play a role.

This suggests that while R&D spending is often a critical driver of growth, market-specific conditions can heavily influence the outcomes.

Chinese equities show relative attractiveness

What the chart shows

This chart presents the earnings yield gaps – the difference between stock yields (the inverse of P/E ratios) and bond yields – of China’s A-shares and large-cap stocks over the past 15 years. It includes the mean, as well as ±1 and ±2 standard deviation bands, illustrating how current yields compare to historical trends.

Behind the data

China’s recent monetary easing has supported a stock market rally, which has reduced the earnings yield gaps. Despite this, the equity risk premia remain above long-term averages, signaling lingering skepticism about the impact of China’s stimulus measures. This skepticism has pushed risk premia up to +2 standard deviations, yet Chinese stocks continue to look attractive when compared to bonds.