Charts of the Week

Futures markets agree: the hiking cycle has ended (except in Japan)

Is the global interest-rate “pause” here? Communications from central banks are trending that way: {{nofollow}}Federal Reserve Governor Christopher Waller said policy is “well-positioned,” while {{nofollow}}Bundesbank President Joachim Nagel said the inflation outlook is “encouraging.” 

Futures markets, meanwhile, are almost unanimous in suggesting we have seen our last rate hike. 

This chart tracks various futures markets (SONIA, ESTR and Fed funds, for instance) to show the rate path priced in by different central banks.  Not only is the current level seen as the peak rate in most cases, the long-awaited “pivot” to cuts is priced in for 2024 – something Nagel and others have signaled is too early to contemplate. (Interestingly, the Reserve Bank of Australia is seen as staying on hold for slightly longer than its peers.)

As ever, the big outlier is Japan. As we’ve written before, it’s the last central bank with negative rates, and “lift-off” is expected next year.‍‍‍‍‍

A simultaneous slump for Western sentiment and Chinese exports

We’ve previously written about China’s disappointing exports. This chart links that performance to worsening sentiment in the country’s predominant export markets.

We’ve created “Chinese Importer PMI” (the blue line, and the right-hand axis) by compiling purchasing managers index readings in China’s biggest markets: the US and the European Union (about 40 percent of the weighting when combined) but also Japan and the ASEAN nations. It also includes Hong Kong, which re-exports Chinese goods. 

The PMI, a measure of sentiment among manufacturing executives, indicates contraction when it’s under 50 – where we are today. It has tracked the year-on-year rate of change in Chinese exports reasonably closely since the pandemic. 

A corporate dashboard for debt-laden AT&T using FactSet

We’re returning to a theme: corporate debt burdens {{nofollow}}after the historic increase in borrowing costs.

The FactSet Connector simplifies the integration of comprehensive company, financial, and portfolio data into the Macrobond platform. We used it to highlight {{nofollow}}US telecoms giant AT&T in this dashboard, but it could be easily applied to many companies.

This heat map uses FactSet’s Fundamentals data to shed light on the evolution of AT&T’s financial health across the last three years. It looks across four broad categories: Leverage (rows 1-4); debt-servicing capacity (rows 5-6); profitability (rows 7-8); and liquidity position (row 9).

The “heat” in the map describes how each quarterly observation ranks in the last five years of data for that metric.  Broadly, AT&T’s leverage metrics have improved after flashing bright red two years ago.

More of the EU enters recession – technically, at least

The term {{nofollow}}“technical recession” refers to two consecutive quarters of negative economic growth. Economists consider other measures to assess whether a nation is “truly” in recession, given the vagaries of revised data and sometimes tiny quarterly moves. Nonetheless, the march of technical recession across Europe on this heat map gives cause for concern. 

Almost all of the third-quarter figures have trickled in from across the European Union. Sweden has joined the Netherlands, Austria, Denmark, Czechia and Estonia in technical recession. 

Germany’s economic malaise has seen Europe’s industrial engine dip in and out of contraction over the past two years, but avoid technical recession – for now.

US inflation: the importance of the base effect

The “base effect” refers to the importance of the year-earlier figure when considering a year-on-year analysis. Put another way, it’s important to be mindful of an outsized surge or drop a year earlier; the month-on-month trend might be more meaningful.
This chart points out the help that base effects can give to US inflation readings, considering that the worst of the price surge took place in 2022. It charts scenarios for year-on-year inflation figures, assuming different month-on-month trends.

Even if the month-on-month change is marginally positive, the year-on-year figure might still decelerate – as the purple line shows.

The “Bull-Bear spread” and market breadth

Our first chart this week – and our first “guest chart” ever – comes courtesy of Macrobond user {{nofollow}}Oliver Loutsenko, founder of OVOM Research in New York.

He was inspired by our previous edition of Charts of the Week, which visualised the ups and downs of bullish and bearish stock-market sentiment as polled by the American Association of Individual Investors.

His own chart tracks the AAII’s weekly “Bull-Bear” spread, in purple and pushed ahead by 15 trading days, against a measure of market breadth: the percentage of stocks in the S&P 500 that are above their 12-month average.

“Sentiment can often be leveraged to give you an idea of where market breadth is going, and, by extension, price,” he writes.‍

The dysfunctional Argentinian economy awaiting Javier Milei

Libertarian populist Javier Milei won Argentina’s presidential election after promising radical change. He advocates policies including replacing the nation’s currency with the US dollar, slashing government departments and even liquidating the central bank. 

Our dashboard of economic indicators over the past five years shows why Argentines might have been tempted to vote for such extreme change. As some of the red cells in the top right indicate, inflation has been in triple digits for almost a year. The government budget deficit is running at almost 7 percent of GDP, and industrial production is declining.

Corporate stress risk in Canada and Brazil under Altman’s model

If you’re looking for {{nofollow}}companies that might be in trouble after the historic increase in borrowing costs, this analysis suggests that you might find them in Canada and Brazil. 

The “Altman Z-score” refers not to the tech executive in the news, but to the professor who developed a formula for predicting companies at risk of bankruptcy. (He {{nofollow}}has recently been sounding the alarm about the “end of the benign credit cycle that we have enjoyed since 2010.”)

We offer the Altman Z-score through our FactSet add-on database. This indicator considers a company’s liquidity, profitability, leverage and other metrics. ({{nofollow}}Read more about the methodology here.) If the Z-score surpasses 3, the likelihood of bankruptcy is low; if the Z-score is below 1.8, one should be concerned that a company might go bust.

We can also apply this analysis to entire stock indexes, as we did here for global benchmarks from different countries. The US stands out as the developed market (DM) with the most robust companies; emerging markets, especially China and India, seem less vulnerable overall than DMs.

Wheat-field health versus crop-chemical shares

Corteva is one of the biggest US agricultural chemical and seed companies. It was spun off after the merger of Dow Chemical and DuPont in 2019.

This chart compares Corteva’s share price to data from the US Department of Agriculture: the percentage of winter wheat crops in “good and excellent” condition in 18 states. (We’ve reversed the axis for the latter indicator.)

We’ve pushed the crop-condition line ahead by about two months to show an interesting correlation: when conditions in the wheatfields improve, shares in the chemical maker sell off – and vice versa. Corteva shares were doing best during 2022, {{nofollow}}when the winter wheat crop was historically small amid drought conditions in key states.

(We’ve written previously about USDA crop quality indicators: during the summer of 2023, drought was still impacting Kansas’ wheat fields after a cold winter.)

UK banks’ weakness versus their US and European counterparts

During the long period of loose monetary policy, banks in many countries were clamoring for higher interest rates. Now that they have them, national fortunes are diverging, as our chart shows.

This visualisation plots some of the biggest UK, European and American banks based on their estimated return on equity and price-to-book values for next year. The positioning of JPMorgan Chase and Morgan Stanley show Wall Street’s dominance against rivals. 

The weakest corner of the chart is populated by Britain’s five big banks. Barclays, which recently announced the {{nofollow}}worst drop in dealmaking fees of any major investment bank, has the worst price-to-book estimate of any of the banks in the chart. 

Undervaluation and overvaluation for the British pound

The British pound is having a strong fourth quarter as a result of American news flow. It’s returned to September levels against the USD as markets increasingly believe the Federal Reserve might be done hiking rates. (The latest leg up occurred after minutes from the Fed’s Open Market Committee were released, suggesting policy makers have moved to a decidedly cautious stance.)

This chart tracks the GBP/USD spot rate against a “fair value” model that is based on terms of trade, earnings yields, a nowcast of gross domestic product and the 10-year/2-year spread for British government bonds. (Macrobond users can click through to the chart to discover more details about the methodology.) 

This model suggests that the GBP has moved into slight overvaluation. 

Credit-card use shows how US consumer spending is withering

We wrote recently about Americans’ lingering post-pandemic savings cushion, and how that probably allowed consumer spending to stay stronger than it otherwise would have in this tightening cycle.

This chart uses near-real-time card transaction data that suggests the “cushion” effect is finally waning – showing that weekly consumer spending has dropped below pre-pandemic levels.

The Bureau of Economic Analysis uses credit card, debit card, and gift card transaction data to create early estimates of retail and food spending. These estimates capture the difference in spending from the pre-pandemic norms relative to the day, month, and annual trend.

As the holiday season approaches, many observers will be watching this indicator and others like it for signs of a rebound – or further deterioration. 

The lacklustre return of Chinese tourists in Asia

China’s reopening disappointed {{nofollow}}the optimists this year – including Thai hoteliers and Tokyo department stores, most likely.

This chart tracks how Chinese travelers are resuming their pre-pandemic travel patterns – or not, depending on the market. It creates a month-by-month “recovery rate” comparing the number of trips to a given country to its 2019 equivalent.

Singapore – the recipient of more business travelers than the other destinations – has fared the best. But cumulative tourism to Southeast Asia’s financial hub this year stands at just 36.3 percent of the old normal. Japan and Thailand have lost ground recently, {{nofollow}}as some press reports discuss.

For more information on the behaviour of the Chinese consumer, we invite Macrobond customers to consult {{nofollow}}Macromill’s weekly survey data. ({{nofollow}}At the start of this year, it was showing that Chinese consumers were putting a low priority on foreign travel.)

Investors have had mixed feelings about this choppy market

This dashboard tracks US stock-market sentiment using weekly data from the American Association of Individual Investors. (We’ve previously visualised the AAII’s Bull-Bear Spread, another way of thinking about similar data.)
This year is notable because bears, bulls and those in between have all taken turns as “sentiment leaders” – with none of these three categories polling above 60 percent at a given moment. (By contrast, previous years have often had a decided bearish or bullish slant – above 60 percent at times.)

The bulls have perked up lately after November’s S&P 500 rally pushed the US benchmark back toward its mid-summer highs of the year.

Amid Southern Europe’s rebound, youth unemployment is stubborn

Much of Southern Europe appears to be an economic success story. {{nofollow}}Greece is said to be in a growth “megacycle” and has regained an investment-grade credit rating. Spain recently revised GDP figures to reflect a {{nofollow}}stronger-than-expected post-pandemic rally. 

However, youth unemployment has been a {{nofollow}}historic problem in the region, and remains so.

This chart compares “activity rates” for persons aged 15 to 24 in the eurozone, comparing the latest figure to the pre-pandemic level and the high-low range since 2000. (Eurostat defines the activity rate as the number of people in the labour force as a percentage of the total population.) 

Greece is doing better than it was pre-pandemic but still trails the rest, and Spain and Italy are in the bottom five.

The Netherlands leads the pack by some distance. Dutch unemployment is generally low of people for all ages, but several observers attribute the youth figure to a system where the {{nofollow}}minimum wage is set particularly low for people below the age of 23. 

A Japanese inflation heatmap as the BOJ ponders ending negative rates

Japan reports inflation figures on Nov. 24. That’s important because its central bank is looking for a positive wage-price spiral before it abandons the world’s last negative interest-rate policy.

Our colleague Harry Ishihara has written repeatedly about the Bank of Japan’s conception of “good” services inflation, where wage growth snaps the decades-long deflationary funk, and “bad” goods inflation – much of it imported from abroad and exacerbated by the weak yen. 

This heatmap breaks down Japan’s consumer price index into goods and services components. Red and blue cells indicate inflation that’s running higher or lower than the 12-month average for each category.

Goods CPI is running hotter than its services equivalent overall, but subcategories differ substantially. Utilities bills are in free fall ({{nofollow}}thanks to energy subsidies) but food inflation is getting even worse. 

Meanwhile, the services component has more red cells as inflation broadly accelerated this year from very low levels. It has plateaued recently at about 2 percent, the BoJ’s long-run target – but an underlying measure (services excluding imputed rent inflation) has approached 3 percent. 

Projecting the Bank of Japan’s coming rate hikes (while others cut)

Japan’s central bank has been an outlier in the global tightening cycle of 2022-23. Markets predict it will be an outlier in 2024-25, as well – this time as the only hawk.

This chart uses data from the swap market to predict the number of rate hikes or cuts coming from different central banks over the next two years. (We’re assuming the increment of each rate move is 25 basis points.)

The markets expect three cuts from the Federal Reserve over the next two years (a rate reduction of 0.75 percent).  But traders’ consensus calls for the Bank of Japan to finally execute “lift-off” and execute at least one rate hike over that time period.

A rainier-than-usual autumn in Britain

Charts of the Week is edited from London, where it has certainly felt as though we’re unfurling our umbrellas more than usual. Data from Britain’s official weather service, the Met Office, confirms the hunch.

This visualisation tracks cumulative rainfall this year (in millimetres) against historic data dating from 1836. With almost two centuries of precedent, we can create a long-term average trajectory over the course of the calendar year. We can also create the historic high-to-low range for every month (the grey boxes).

We can see that 2023 has often indeed been rainier than average – {{nofollow}}especially since September. But we were never near a trajectory to set historic records. The effect of {{nofollow}}London’s late spring dry spell is also clearly visible – dragging the cumulative trend line back to the average after the wettest March in 40 years. 

Pollution-fighting palladium slides amid wider adoption of EVs

Palladium prices recently dropped below USD 1,000 per ounce, reaching a five-year low. The main driver: its key use case is gradually becoming obsolete.

The metal is a major component used in catalytic converters, which are used to control emissions in traditional internal combustion engines. But as demand for emission-free electric vehicles picks up, demand for the metal has waned. (When palladium prices approached USD 3,000 earlier this decade, automakers also started {{nofollow}}switching to platinum.)

The second pane of the chart tracks long and short positions for the metal on NYMEX, breaking them down between industry players like miners and processors and the rest of the market. Amid the recent price action, the palladium industry appears to be betting that prices will rebound (as we highlighted in red).

An innovative daily data series that’s pointing up for China’s economy

We’ve been posting charts pointing to a nascent recovery in China. Here’s another: the high-frequency YiCai Economic Activity Index. 

This indicator, which is updated daily, is an innovative amalgamation of data: it tracks traffic congestion, air pollution, a commercial housing sales index, and unemployment and bankruptcy indices based on internet searches.

This chart compares YiCai’s track record (in the lower pane) to growth rates for three conventional economic indicators in the top pane: retail sales, industrial production and fixed asset investment. (All three of these macro data figures will be released on Nov. 15.)

The YiCai index has been creeping higher lately. Will it once again prove to be a key leading indicator, as it was through the strong rebound of 2020-21 and the disappointments of 2022?

UK government borrowing in context

It’s been a year since the debacle of the Truss-Kwarteng “mini-budget” that would have seen Britain run massive deficits to fund tax cuts. By contrast, the Sunak-Hunt era has seen a quiet continuity of fiscal orthodoxy, as our chart demonstrates.

Chancellor of the Exchequer Jeremy Hunt, worried about higher borrowing costs, has fended off pressure for tax cuts. He also {{nofollow}}presided over a healthier-than-expected turn in the public finances as the UK economy defied some of the gloomier predictions of 2022. 

This double-paned visualisation tracks the UK’s public sector net borrowing (excluding public sector banks) month by month – both in absolute terms and as a percentage of gross domestic product (GDP).

The blowout borrowing of the pandemic era is highlighted in gray. Today, borrowing is roughly in line with the pre-pandemic era, at least in percentage-of-GDP terms.

{{nofollow}}This week’s King’s Speech suggested there will be more of the same. The government will “support the Bank of England to return inflation to target by taking responsible decisions on spending and borrowing,” the monarch told Parliament. 

The record short Treasury bets that have regulators worried

Hedge funds are making a record bet against US Treasuries. 

This chart uses data from the Commodity Futures Trading Commission to compile net long and short positions in US government debt. There are large short positions against two-, five- and ten-year securities.

While there will be some “fundamental” positioning betting Treasuries have further to fall amid sticky inflation and “higher for longer” Fed rates, most of the short bet is attributed to the “basis trade” – an arbitrage of price differences between cash bonds and futures. Hedge funds borrow a lot of money for such trades – hence the “leveraged funds” referred to in the chart title.

The size of the bet {{nofollow}}reportedly has regulators worried about financial stability risks – especially since yields fell in the first week of November (which some observers say was short-covering of that very same bet, as well as the result of optimism about a “soft landing” for the economy).
Notably, the well-known hedge-fund manager Bill Ackman recently {{nofollow}}exited his own short bet against 30-year Treasuries, saying the trade (and the world) had become too risky.

Europe’s cooling inflation heatmap might show why Lagarde paused

This visualisation revisits one of our favourite themes: an inflation heatmap. Less than a year ago, eurozone inflation was broadly advancing across sectors and geographies.

Today, the harmonised index of consumer prices (HICP) measure of inflation is slowing in almost every country in the currency region – and it has even turned negative in the Netherlands and Belgium.

Will inflation keep cooling off? {{nofollow}}That’s “certainly our forecast,” European Central Bank President Christine Lagarde recently said after she hit the pause button on rate hikes.

An analysis showing the strong Swiss franc is overvalued

The Swiss franc has been the strongest performer among the G10 currencies this year. {{nofollow}}Observers are attributing this to the franc’s safe-haven appeal at a time of geopolitical stress, as well as the central bank’s vow to support the currency if necessary to reduce inflation.

This chart models the franc over the long term, aiming to identify periods of overvaluation and undervaluation based on economic theory including the “law of one price” and interest-rate parity*. The blue line tracks the CHF/EUR rate but multiplies it by the spread in short-term interest rates, and then generates a trend line. (If the Swiss are offering a higher interest rate versus the ECB, the franc is expected to appreciate versus the euro, and vice versa.)

We’re in a period of overvaluation versus the euro by this metric, two standard deviations away from the trend. The franc hasn’t been substantially undervalued under this analysis in more than a decade. ‍

*An academic paper discussing these theories can be found {{nofollow}}here.

Rate-cutting central banks are returning

We can’t really say we’re in a globally synchronised hiking cycle anymore. As our chart shows, almost one-fifth of the 79 central banks we track are now cutting rates.

Last week, Brazil's central bank lowered its key policy rate, joining its counterparts in Peru, Costa Rica, Poland, Chile and Hungary.

Emerging markets were some of the leaders in hiking rates to control inflation, and they’ve similarly taken leadership in a cutting cycle.

Our geopolitical risk index is spiking again

As the conflict between Israel and Hamas enters its second month, and Iranian proxies attack both Israel and American targets, we’re revisiting this geopolitical risk index from Economic Policy Uncertainty.

This academic group creates indices relating to policy challenges ranging from infectious diseases to wars, tracking newspaper archives going back decades.

The situation in Gaza has driven the risk index sharply higher, but it remains well below the shock of Russia’s invasion of Ukraine in early 2022.

Stock valuations according to GARP

It’s a "{{nofollow}}stock picker’s market," Barron’s suggested earlier this year. This investing cliché suggests that selecting growth stocks with appealing valuations will be paramount in an environment where broader indexes are stagnant. ({{nofollow}}Indeed, the S&P 500 finished October down 2 percent amid earnings-related selloffs in some high-profile names.)

The strategy in our scatterplot visualisation is “growth at a reasonable price,” or GARP. Using FactSet data, we created buckets of large-capitalisation US stocks by sector, searching for relative undervaluation. Our “earnings growth” x axis compares estimates for the next 12 months to the 12 months after that; our “historic price-earnings valuation” y axis compares the forward P-E ratio’s deviation from the 10-year average.

This analysis found that telecommunications stocks have the greatest GARP potential: they’re well below their historic price-earnings ratios and analysts are estimating dramatic earnings growth over the next two years. Consumer services, utilities and energy also perform well in this analysis. The reverse was true for consumer cyclical and business-services stocks.‍‍‍

The Taylor Rule and where rates “should” have been

When assessing Federal Reserve policy, it’s interesting to look at the {{nofollow}}Taylor Rule, created by a Stanford University economics professor. It’s a rough guideline for a central bank’s response to inflation; typically, formulations include the concept of a “natural” rate of interest, based on factors including price levels and real incomes. The Taylor Rule also usually calls for a relatively high rate when inflation is above target. 

This chart compares Fed policy to two formulations of the Taylor Rule based on different assumptions about the natural rate of inflation.

Since the financial crisis, and especially since the pandemic, the Taylor Rule has usually called for tighter policy than the Fed delivered. (Taylor himself was often a critic of what he perceived as the Fed’s “easy money.”)  As inflation has slowed after the Fed’s historic tightening cycle, the rates have converged. 

Investors’ steady inflows into turbulent markets

This chart tracks the evolution of global fund flows into equity and bond markets over the past two decades by calendar year.

Even with {{nofollow}}the S&P 500 sliding since July as the market digested “higher for longer” Fed policy, and even as the bond rout continued through 2023, investors continued to place money in both asset classes until very recently, as our chart shows. It wasn’t a repeat of the excitement about equities in 2021-22, but cumulative flows for the year are still quite positive. 

Last year is notable for the money that flowed out of bonds after a historic selloff.

A bullish trajectory for Japanese confidence

This visualisation is one of our “clocks” that track the business cycle. It’s showing how, sentiment-wise, Japan remains in expansion mode.

It does this by assessing two indicators: the nation’s leading index (which points to the coming trends in the economy, using inputs such as job offers and consumer sentiment) and the coincident index (which aims to identify the current state of the economy through data such as factory output). The government’s latest readings for both will be released on Nov. 8.

It doesn’t seem like a slowdown is imminent. Staying in the “expansion” quadrant will make it easier for the Bank of Japan to consider “lift-off” from the world’s last negative interest-rate policy in 2024.

French and German gloom, Asian optimism for PMIs

We regularly examine the purchasing managers index (PMI), an indicator that tracks sentiment among executives in the manufacturing sector. 

This visualisation compares PMI across major economies. It gives an idea of why the European Central Bank chose to put rate hikes on hold: the economic engines of France and Germany are suffering on a global basis. (They’re both far below the “neutral” PMI level of 50.)

Asian economies, highlighted in green, are generally faring better – especially India and Indonesia. The US is right on the neutral line.‍

Changing perceptions of ECB rate peaks using Euro short-term futures

The Euro Short Term Rate, or €STR, is the primary overnight money-market benchmark rate, reflecting how expensive it is for banks to borrow in the very short term. Futures for the €STR are considered to be a representation of market expectations for the ECB’s key policy rate.

This chart tracks the current futures curve against two past counterparts – in particular, recent “peaks” for what was seen as the ECB’s likely terminal rate last winter (Dec. 27) and this spring (March 8).

As inflation proved sticky, there was a dramatic change in expectations between December and March; the terminal rate was pushed up by about 75 basis points. Since then, and with the ECB likely on pause for a while, the curve has flattened. 

Different eras for US real yields

As price increases slow and central banks raise interest rates, it’s interesting to see how US 10-year yields have fluctuated when adjusted for inflation.  

This chart breaks down the evolution of real US 10-year yields by creating an average for each decade. The real yield peaked in the early 1980s, when Federal Reserve Chairman Paul Volcker was famously engaged in sharp rate hikes to bring down inflation that was even higher than it was 2022-23.

As we can see in the 1970s, bonds were a bad bet; inflation largely wiped out your yields. By contrast, investors who bet that Volcker would succeed in his quest were rewarded handsomely. The average post-inflation return was 5 percent in the 1980s – making it the best decade.

1970s-style returns returned in the 2010s – this time due to disinflation and ultra-low rates. And we’re still in negative returns so far in the 2020s after a historic, inflation-driven bear market.‍‍‍‍‍‍‍‍‍‍‍

Factoring in Fed hikes (or cuts) after next week’s likely pause

Fed policy makers convene next week, and the market consensus calls for them to stand pat on interest rates.

This table peers into 2024 by using the implied probabilities for rate levels predicted in the Fed funds futures market.

Will Jay Powell announce one more hike before the end of the year? The market is pricing in a 29 percent chance of this outcome. 

As this chart shows, the chance of two more rate hikes over the next year (which would bring the key policy rate to a 5.75- 6 percent range) is viewed as unlikely, though not impossible. 

There’s a 50 percent chance that we’ll still be on “pause” mode in May; by the end of 2024, a 90-percent-plus chance of a pivot to rate cuts has been priced in.

Taiwan’s semiconductors boost the trade surplus to a historic high

Amid perennial geopolitical tensions and a wobbling global economy, Taiwan can always count on demand for its high-end semiconductors.

Taiwan Semiconductor Manufacturing (TSMC), whose customers include Apple and Nvidia, {{nofollow}}recently reported better-than-expected third-quarter figures. While the company had been navigating one of the chip industry’s cyclical downturns, analysts said TSMC is poised for another leg of growth amid demand for AI chips. 

This chart aims to show the outsized effect of the semiconductor industry on Taiwan’s trade balance – which recently touched a historic surplus. The chip industry is included in the “machinery & transport equipment” segment. All other sectors (in purple) are experiencing a trade deficit.

Japan’s labour market over the decades

As Japan maintains the world’s last negative interest-rate policy and the yen sinks, the central bank is watching for sustained wage growth before it moves into positive territory. 

This visualisation shows the sea change in the Japanese job market over the decades. In the first pane, we track the ratio of job openings to applicants (the blue line, measured on the right-hand axis) to year-on-year wage growth, as measured on the right-hand axis. 

After the famous “lost decades” for Japan, the trend line for the former changed radically in the 2010s. Starting in about 2014, the number of available jobs exceeded the number of applicants. Despite that, year-on-year wage growth has stayed relatively muted (so far), and the market has not returned to pre-pandemic tightness levels. 

However, wage-driven services inflation (as well as underlying inflation, which excludes food and energy) is now above the 2 percent target for the first time since 2014, as the second pane shows. 

As the BoJ announces its latest policy update on Oct. 31, stay alert for more labour market data released on the same day.‍

Rich and poor Americans’ post-pandemic savings cushions

Between government income support, windfall returns from tech stocks and lockdowns’ blow to consumerism, the pandemic made a big difference for Americans’ savings – whether they were rich or poor. 

This chart is a follow-up to our chart from earlier this month, which showed how the US “savings cushion” was revised to be plusher than originally assumed.

We segmented Americans into five “net worth buckets” and compared their deposits in checking and savings accounts to the last quarter before the pandemic (Q4 2019), adjusted for inflation. 

The purple bars represent the peak gains in peoples’ bank accounts. The dark blue reflects how those gains have shrunk, due to inflation, spending and debt paydowns. For the bottom 90 percent of the wealth distribution, the extra savings are almost gone.

Perhaps surprisingly, the merely affluent did relatively better than the ultra-wealthy; the top 1 percent of households by wealth, excluding the richest 0.1 percent, saw their savings jump more than 42 percent. They have also retained the most savings of any group, with almost 17 percent more inflation-adjusted dollars in the bank than four years ago. 

Seasonality isn’t kicking in this year for the strong US job market

Even after a historic rate-hiking cycle, the US labour market has tended to defy gravity. This chart shines another light on this resilience.

This visualisation tracks seasonality in US employment. Jobless claims are usually highest during the winter, as companies tend to announce more layoffs later in the year; meanwhile, students tend to enter the workforce mid-year. This results in a W-shaped chart. 

As a result, labour figures are often “seasonally adjusted” to strip out the effect of predictable trends. 

This chart, however, is very much non-seasonally-adjusted. We’re experiencing an anomaly: jobless claims are not doing what they usually do in the autumn, and are evolving on a trajectory lower than the 10-90 percentile band.

Cooling (and re-heating) inflation in emerging markets

This Tetris-style chart considers inflation momentum across 14 emerging markets, starting in January 2020. (Like last week’s “accelerometer,” this visualisation aims to track the speed of inflation for multiple economies at once.)

This time, we’re defining inflation momentum as the monthly change in the year-on-year headline CPI rate. Red cells indicate month-on-month acceleration; blue cells, a deceleration.

The white line cutting across the cells tracks the percentage of these 14 countries that are experiencing accelerating inflation on any given month. 

After an increasing wave of blue throughout 2022 and much of 2023, the red cells are mounting a comeback. Brazil, Turkey and the Philippines are among nations that have flipped back to accelerating inflation.

Bitcoin rallies on ETF enthusiasm‍

{{nofollow}}Stocks have been under pressure lately, but Bitcoin might be back. 

The cryptocurrency has roughly doubled in price over the past year and almost reached USD 35,000 this week, an 18-month high, as our chart shows. 

The recent enthusiasm is likely related to {{nofollow}}BlackRock’s proposed iShares Bitcoin ETF. It was listed on the Depository Trust and Clearing Corporation (DTCC) last Monday in what was considered a mini-win for crypto investors. 

The concept of a crypto ETF is still under review by the SEC, however. Indeed, Bitcoin wobbled when BlackRock’s ETF vanished from the DTCC website a day later, but it later reappeared.

The second panel reflects trading volume as measured by value. This remains subdued compared to Bitcoin’s 2021 heyday.