Charts of the Week
US industry sectors react to Republican victory in 2024 election
What the chart shows
This chart tracks the performance of S&P 500 sectors during presidential election years, highlighting sector overperformance and underperformance relative to the index. Each year is color-coded by the political party of the elected president—blue for Democrats and red for Republicans—revealing patterns in sector performance based on political outcomes.
Behind the data
When this chart was first published on 30 August 2024, the focus was on the historical tendency of certain sectors to outperform the S&P 500 during presidential election years. It highlighted a clear correlation between sector performance and the political affiliation of the winning president, with Financials typically outperforming during Republican victories and Consumer Discretionary thriving during Democratic wins.
Since then, the 2024 election results have reinforced some of these historical trends while diverging in others. For example, Financials and Communication Services aligned with their historical patterns of outperforming during Republican years. However, Consumer Discretionary and IT, which showed mixed historical performance in similar contexts, delivered strong results in 2024, demonstrating the complexity of sector performance beyond historical norms.
US markets thrive despite recession signal
What the chart shows
This chart tracks the performance of the S&P 500 following a trigger of the Sahm Rule, which occurs when the three-month average unemployment rate rises by 0.5% or more from its prior year low. Historical data shows that such triggers have consistently preceded recessions, with the index typically experiencing turbulence initially but recovering strongly over the subsequent year. The chart visualizes median, interquartile and percentile ranges of S&P 500 performance after Sahm Rule triggers, offering insights into potential market behavior over six-month and one-year horizons.
Behind the data
When this chart was first published on 9 August 2024, the Sahm Rule had recently been triggered, and historical precedent suggested an imminent recession. At the time, the analysis indicated potential short-term downside for the S&P 500, though historical data showed recovery and growth over the longer term.
Since then, this cycle has defied historical patterns. 2024 ends without a recession, and consensus forecasts assign a low probability of one in 2025. Instead, the economy has displayed surprising resilience, with GDP growth remaining strong and the S&P 500 surging to new highs. This deviation from past trends underscores the unique dynamics of this economic cycle, driven by fiscal stimulus, sustained consumer spending and labor market flexibility.
Localized employment trends help US avoid recession in 2024
What the chart shows
This chart tracks the share of US states where the three-month average unemployment rate rose by 0.5 percentage points or more relative to its 12-month low, a measure of localized Sahm Rule triggers. The green line represents an equally weighted share of states, while the blue line reflects a labor force-weighted measure. A horizontal grey line at 31% marks the historical benchmark associated with nationwide recession onset. The chart reveals how state-level Sahm Rule triggers fluctuate significantly during economic cycles, with peaks typically coinciding with major recessions.
Behind the data
When this chart was first published on 5 April 2024, over 50% of states had triggered the Sahm Rule, exceeding the historical recession threshold of 31%. This raised concerns of an impending recession, amplified by concentrated layoffs in sectors like technology, finance and services. At the time, the broadening scope of state-level triggers suggested sector-specific vulnerabilities spilling over into wider economic risks.
Since then, the Sahm Rule was ultimately triggered in only 40% of states, far fewer than during past recessions such as 2008 or 2020. This divergence helps explain why 2024 avoided a nationwide recession. Unlike prior cycles where unemployment pressures were widespread, the 2024 triggers were concentrated in specific states and industries, reflecting localized employment dynamics rather than a broad-based downturn.
Volatile revisions to US payrolls spark shift to alternative data source
What the chart shows
This chart tracks 12-month revisions to US nonfarm payrolls for April-to-March cycles, comparing initial reported figures to revised totals. Each year is represented by a red bar for downward revisions or a green bar for upward revisions, scaled by magnitude. The blue line shows the error relative to total payroll levels, while the dotted orange line indicates the average negative revision mean. The dotted red line represents the 5th percentile Value-at-Risk (VaR), marking extreme downside scenarios for revisions.
Behind the data
When this chart was first published on 23 August 2024, US nonfarm payrolls had been revised downward by 818,000 jobs for the 12 months through March 2024, a significant reduction of 0.5%. This marked the largest downward revision since 2009, exceeding historical averages and even surpassing the 95% confidence VaR estimate of 602,000. Concerns were raised about the reliability of initial payroll figures and the broader implications for the labor market’s perceived strength.
Since then, the volatility of these revisions has further highlighted the challenges of interpreting employment data. Repeated large-scale adjustments, often exceeding hundreds of thousands of jobs, have led some macroeconomists to seek alternative data sources. For example, job opening data from the Indeed Hiring Lab – available through Macrobond – offers a more stable and reliable perspective on labor market trends, closely correlating with payroll data but exhibiting significantly less volatility.
These ongoing revisions underscore the need for caution when relying on nonfarm payrolls for real-time analysis.
China’s housing market shows signs of recovery after government stimulus
What the chart shows
This chart visualizes diffusion indices – the share of cities experiencing month-on-month price changes – for new and existing homes across 70 major cities in China. A reading of 50 indicates no change in prices, while readings above or below reflect price increases or decreases, respectively. The blue line tracks new housing, and the green line tracks existing housing.
Behind the data
When this chart was first published on 2 February 2024, the diffusion index for existing housing had just hit zero for the first time since 2014, signaling widespread price declines. The index for new housing had also reached a historic low of 10, reflecting significant stress in China’s property market.
Since then, the index for second-hand housing has hovered near zero, while the new housing index declined even further below 10. However, recent months have shown signs of a turnaround. Both diffusion indices have risen, likely spurred by the People's Bank of China’s (PBoC) easing of monetary policies, including a 30-basis point cut to the 1-year medium-term lending facility (MLF) policy rate and a 50 basis-point reduction in the interest rate on outstanding housing loans in September.
Additionally, the lifting of home purchase restrictions – first imposed in 2016 during a housing price boom – has provided further support.
Despite these encouraging signals, average housing prices in China's major cities remain at historically low levels. But the market seems poised for recovery, especially if further government stimulus measures are enacted.
Chart packs
IMF flags rising debt levels as fiscal pressures mount
What the chart shows
This chart displays the debt-to-GDP ratio across various global economies, segmented into three sectors: general government, households and nonprofit institutions serving households (NPISHs), and non-financial corporations. Key groupings, such as the G20, Emerging Markets, and Advanced Economies are also highlighted to provide a broad perspective on global debt distribution.
Behind the data
In its October 2024 Fiscal Monitor, the IMF projects that global public debt will exceed $100 trillion by the end of the year, with the global debt-to-GDP ratio expected to approach 100% by 2030. Rapid debt accumulation is concentrated in major economies, including the US and China, but the pace and composition of debt vary significantly worldwide.
The IMF identifies several key risks to public debt: rising costs from technology innovation, climate adaptation, demographic pressures, political volatility, and optimism bias in economic projections. To address them, it has introduced a “debt-at-risk” framework to help policymakers assess various debt scenarios under adverse conditions.
The analysis shows that, under current fiscal policies, most countries will be unable to stabilize their debt-to-GDP ratios without further adjustments. The IMF recommends gradual, people-centric fiscal adjustments to safeguard growth, warning that deep cuts to public investment could harm long-term economic stability. However, countries with strong fiscal institutions are better positioned to protect critical investments, even during crises.
Rising rates trigger historic losses on US investment securities
What the chart shows
This chart displays the unrealized gains and losses on US investment securities from 2006 to the present, focusing on two key categories: ‘available for sale’ and ‘held to maturity.’ It shows the value fluctuations in these securities for each year. The chart highlights the impact of recent interest rate hikes on banks’ balance sheets.
Behind the data
The recent historic surge in interest rates has had a notable impact on banks’ balance sheets, significantly reducing the market value of Treasuries and government-backed mortgage securities. As rates rise, the value of these securities falls, leading to substantial unrealized losses. Even though the Fed has started a rate-cutting cycle, these unrealized losses remain elevated, currently exceeding $500 billion. This is considerably higher than those observed during the Global Financial Crisis (GFC), highlighting the scale of recent rate increases and their prolonged effects on asset valuations.
US yields defy expectations in latest Fed cutting cycle
What the chart shows
This chart shows the response of US 10-year Treasury yields to the first rate cut in each of the past seven Fed rate-cutting cycles. The initial cut in each cycle is marked as Day 0, with yield movements tracked over the following 50 days.
Historically, yields have tended to decline within 50 days of a cut, reflecting market expectations of slower economic growth and further easing. In contrast, in the current cycle, the 10-year yield has climbed about 50 basis points in the 50 days since the Fed’s cut on 19 September.
Behind the data
Normally, Fed rate cuts signal slowing economic growth and lower inflation expectations, which often lead to lower long-term yields. However, this cycle has been different. Despite the recent cuts, the US economy remains strong, with consumer demand and the labor market showing resilience. This economic strength has tempered expectations for further easing, and as a result, yields have risen rather than fallen.
At the same time, investors are worried about another bout of inflation amid political uncertainty ahead of the election – further driving yields upwards. The potential for impactful policy shifts could alter inflation expectations, and markets are closely watching how yields may respond after the 5 November election.
Trump election odds and Treasury yields in lockstep as inflation fears grow
What the chart shows
This chart tracks two significant indicators related to the US macroeconomic and political outlook. The blue line reflects the 10-year US Treasury yield, while the green line represents the probability of a Trump election victory according to Polymarket odds. Both lines have demonstrated a strong correlation, generally moving in tandem over the past four months, with notable increases through September and October.
Behind the data
The simultaneous upward movement in both 10-year yields and Trump election odds reflects a convergence of economic and political factors, heightening investor anticipation of inflation pressures.
The first is the Fed’s recent policy actions. In September, it cut rates by 50 basis points, signalling a significant shift in monetary policy despite a robust labor market and overall economic growth. This aggressive easing has fuelled fears that inflation could re-emerge. Investors have thus adjusted their expectations, leading to a rise in long-term yields as they demand higher returns to offset anticipated inflation.
The second factor is the increasing likelihood of a second Trump presidency. Markets anticipate that his proposed policies—such as large tariffs, tax cuts and expansive deficit spending—could be inflationary. With Trump now favoured to win, yields are adjusting in line with his rising odds, reinforcing expectations of higher inflation if these policies materialize.
Pessimistic sentiment persists across China’s key economic sectors
What the chart shows
This chart shows the historical z-scores of China’s consumer, manufacturing, and real estate sentiment indices from 2000 to the present. A z-score represents the number of standard deviations a data point is from the mean, allowing us to see how sentiment levels deviate from long-term averages. A z-score near zero indicates sentiment close to historical norms, while extreme positive or negative scores indicate unusually high or low sentiment.
Behind the data
Despite recent monetary and fiscal stimulus packages, sentiment in China’s main economic sectors—consumer, manufacturing and real estate—remains pessimistic. Although consumer spending and manufacturing activity are expected to be primary growth drivers, sentiment indices suggest that confidence has not yet recovered. The real estate sector, facing significant structural challenges, shows particularly low confidence. Given all this, achieving the government’s 5% growth target for this year and in the coming years will be challenging. The data shows that while short-term boosts from stimulus measures may help, more structural reforms may be needed to address underlying weaknesses and restore long-term confidence.
Global equity returns show elevated risk amid macro uncertainty
What the chart shows
This scatter chart depicts the relationship between MSCI All Country World Index (ACWI) returns and global macro risk (using the Citi short-term global macro risk index) over the past ten years. It highlights their inverse correlation, depicted through a fitted linear trend line, alongside one and two standard error bands, which help illustrate the degree of deviation from the trend.
Behind the data
Although global stock indices have generally risen over the past decade, this chart underscores the persistent financial vulnerabilities associated with elevated debt levels and a growing disconnect between geopolitical tensions and financial market performance. By comparing global equity returns with global macro risk, we can see that MSCI ACWI returns over the past month are positioned between the +1 and +2 standard error bands, suggesting they may be moderately overvalued relative to historical trends. This positioning may indicate an increased level of risk relative to typical macro conditions. Increased vigilance in investment decisions may be needed because global equity markets may be pricing in a level of optimism that could be vulnerable to shifts in macro risk factors.
Argentina leads emerging market bond returns amid reform push
What the chart shows
This chart ranks the annualized gross performance of government bonds across 12 emerging markets, using the ICE BofAML fixed-income indices, which track USD-denominated bonds across all maturities. The highest-performing markets are ranked at the top for each year.
Behind the data
Argentina's bonds have recently surged to the top, reaching a critical psychological threshold for international investors with a remarkable 72% year-to-date return. Since taking office last December, President Javier Milei has implemented a series of reforms to curb government spending, narrow the fiscal deficit, and foster a more investor-friendly environment. These measures appear to have significantly boosted investor confidence, driving Argentina's bonds to new highs.
Other emerging markets trail Argentina’s returns, led by Pakistan and Egypt. Pakistan’s bonds have demonstrated stable returns, maintaining a consistent position within the rankings. Egypt’s bonds have posted a sharp rise, delivering nearly 32% in returns this year – up from just 5% in 2023. This underscores a significant shift in emerging market performance, highlighting how fiscal and policy changes in specific economies can drive notable variations in bond market returns.
US government deficit surges despite strong economic conditions
What the charts show
Both charts use outlays and receipts data from the US Treasury to illustrate how government revenue supports current spending. The first chart breaks down the sum of government receipts over the past 12 months. It also highlights the $1.83 trillion deficit – the gap between revenue and spending.
The second chart builds on this, showing the 12-month rolling sum of receipts as a percentage of total spending and how the composition of these receipts has evolved over time.
Behind the data
Over the past year, the US government has spent $6.75 trillion but only collected $4.92 trillion in revenues, leaving a $1.83 trillion shortfall. This deficit, accounting for 27% of all government spending, is financed through the issuance of Treasury securities, effectively borrowing to cover the gap.
Such hefty deficit spending raises concerns about sustainability, especially given the current economic environment. The US economy is experiencing solid GDP growth, a healthy labor market and cooling inflation – conditions typically associated with lower deficit spending. However, the fact that the deficit remains so large during a period of relative economic strength suggests that it could balloon even further during the next downturn or recession. Without significant adjustments to revenue or spending, the government’s reliance on borrowing is likely to increase, adding further pressure to fiscal sustainability.
10-Year Treasury yields diverge from macro conditions, signaling inflation risk
By Huw Roberts, Head of Analytics, Quant Insight
What the chart shows
This chart consists of two panels, each offering a perspective on the relationship between US 10-year Treasury (UST) yields and macroeconomic conditions. The bottom panel tracks the "Qi Fair Value Gap.” The grey horizontal line separates periods where UST yields are either "too high" (above) or "too low" (below) compared to fair value based on macroeconomic inputs. The chart highlights how the 10-year UST yield has stayed mostly below its fair value until recently, indicating that yields are now above macroeconomic expectations.
The top panel compares the actual UST 10-year yield with the Quant Insight (Qi) model value, which represents the expected yield based on macroeconomic factors. Grey boxes highlight instances where the yield "catches up" to macro conditions. Recent data shows that UST 10-year yields are at their highest divergence compared to what macro conditions would suggest, signaling that current yields may be overextended relative to fundamentals.
Behind the data
There are two key takeaways from the Qi model. First, the ‘Qi Fair Value Gap’ indicates that 10-year UST yields currently screen as approximately 12.5 basis points too high relative to aggregate macroeconomic conditions. This divergence of +0.5 sigma is modest, but it's the largest positive gap observed in the past year. This suggests that while yields are not drastically misaligned, they are now at an elevated point compared to the macroeconomic backdrop.
Second, the model highlights the sensitivity of 10-year yields to inflation, while showing minimal response to GDP growth. This reinforces the view that USTs are no longer serving as a hedge against recession risks, but rather are reflecting inflationary concerns. Despite the dominance of the inflation-driven short-duration narrative, these yield levels may not be ideal for initiating new bearish positions on bonds, as yields have already ‘caught up’ to macroeconomic factors.
Betting markets show nearly 50% chance of Republican sweep in 2024
What the chart shows
This chart tracks Polymarket betting odds for the balance of power following the 2024 US elections. It helps visualize how market sentiment has shifted over time regarding these potential election outcomes.
Behind the data
As the 2024 election approaches, financial markets appear less anxious about the political uncertainties than initially expected. Market participants seem to have grown more comfortable with the range of potential outcomes. According to Polymarket betting odds, there is now an almost 50% chance of a Republican sweep, where Donald Trump wins the presidency and Republicans control both the House and the Senate. Conversely, the odds of a Democratic sweep under Vice President Kamala Harris have diminished, while the likelihood of a split Congress – whether under Trump or Harris – continues to fluctuate.
China faces deflationary pressures despite stimulus efforts
By Saeed Amen, Co-Founder, Turnleaf Analytics
What the chart shows
This chart compares realized and forecasted year-over-year non-seasonally adjusted (YoY NSA) Consumer Price Index (CPI) for China. The green-shaded area tracks actual realized CPI. From October 2024, it shows two lines projecting future CPI trends: the blue line represents Turnleaf Analytics’ model forecast, while the grey line shows the benchmark consensus forecast from the Asian Development Bank (ADB.)
The Y-axis ranges from -1 to 5, capturing potential deflation and inflation up to 5%. The key takeaway is that both forecasts predict inflation to remain well below 2% over the next 12 months.
Behind the data
In late September, Beijing introduced monetary and fiscal measures to boost demand and stabilize the weak property market, aiming for a 5% growth target in 2024. Despite these efforts, price pressures remain low, reflecting subdued consumer confidence.
Around 70% of household wealth is tied to real estate, which has declined by 3.36% over the past year. Rising youth unemployment (+13.11% YoY) has further weakened demand, spilling over into key sectors like manufacturing and exports. Deflationary risks are intensifying, with liquefied petroleum gas exports dropping nearly 30% in the past month and steel and sheet metal inventories down 15.7% and 29.4% month-over-month, respectively. Vehicle exports also fell 27.3% MoM, exacerbated by the EU’s recent decision to impose tariffs on Chinese electric vehicles.
While Beijing’s stimulus aims to mitigate these issues, the weak property market, declining exports and low consumer sentiment continue to weigh heavily on China’s economic outlook.
Global earnings revisions tilt downward amid economic uncertainty
What the chart shows
This chart tracks broad equity earnings revisions—net up and downward changes—over the past 100 trading days for major markets in global stock benchmarks. It compares current earnings revisions with those from three, six and 12 months ago. The chart also displays the interquartile ranges and the 10th to 90th percentile ranges to provide insight into the historical distribution of revisions for each country.
Behind the data
Amid ongoing economic uncertainty, global risk appetite has fluctuated, while there has been a general trend of downward earnings revisions across multiple countries. Notably, France, China and the UK have seen the most significant net downgrades, with revisions falling below the 10th percentile, indicating substantial pessimism. Canada, South Korea, Brazil, the US and India also experienced net earnings downgrades. Japan, while still reflecting some negativity, is closer to neutral, suggesting relatively stable earnings prospects.
In contrast, Taiwan stands out with significant net upgrades, indicating more positive revisions and a brighter earnings outlook.
The data underscores the downside risk to earnings in many regions, suggesting that investors may need to adopt more vigilant and flexible strategies.
Gold hits new highs while platinum group metals show signs of cooling
What the chart shows
This chart uses Z-scores to compare the historical price dynamics of seven precious metals: gold, silver, and five platinum group metals (PGMs): platinum, palladium, iridium, rhodium and ruthenium. The Z-scores provide a standardized measure of each metal’s price relative to its 30-year rolling average.
Behind the data
The recent surge in gold prices has captured significant attention in 2024, with the metal reaching multiple all-time highs as investors flock to safe-haven assets amid economic uncertainty. Silver has also begun to climb, driven by similar demand dynamics. Both metals reflect heightened market anxiety, leading to a strong bid for traditional store-of-value commodities.
In contrast, the price movements of the PGMs have remained relatively stable over the past year, suggesting more subdued demand. Given that these metals are crucial to electric vehicle (EV) production – particularly for catalytic converters – their price stagnation may signal a potential cooling of growth in the EV industry.
China’s credit 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.
Modest decline in US mortgage rates challenges expectations of housing market boom
What the chart shows
This chart shows consensus forecasts from Blue Chip Economics for the average US mortgage rate over the next six quarters. The blue line represents the mean forecast for each quarter. The grey box highlights the 25th to 75th percentile range, while the green box represents the 10th to 90th percentile range.
Behind the data
Even though the Federal Reserve (Fed) is expected to continue cutting interest rates over the coming quarters, US mortgage rates are projected to decline much more modestly. This is likely because the anticipated Fed Funds rate cuts have already been largely priced into current mortgage rates. As a result, the average mortgage rate is expected to decrease by only 34 basis points from now until the end of Q1 2026.
This forecast contradicts a common narrative in the US housing market, which suggests that decreasing interest rates will spark a new boom in mortgage demand. However, if mortgage rates do not drop significantly, this demand may not materialize as expected.
Term premium poised for upside amid Fed easing and elevated bond volatility
What the chart shows
This chart illustrates the decomposition of the 10-year US Treasury yield into its components from two perspectives: risk neutrality and term premium, further broken down into breakeven inflation and real yield from 1999 to the present. It also highlights periods of recession during this timeframe.
Behind the data
Considering the periods of relatively high inflation – both before the Global Financial Crisis (GFC) and after the COVID pandemic – recent risk neutrality and inflation expectations appear close to their historical norms. At the same time, long-term real interest rates have already leveled up.
The term premium shows some upside room, as it was positive pre-GFC but has remained flat lately. This upward risk is also reflected in the heightened bond-implied volatility observed in recent years.
Despite the Fed's easing cycle, upward pressure on bond yields could stem from the term premium.
Surge in major hurricanes across the US as climate volatility intensifies
What the chart shows
This chart tracks the number of hurricanes in the US across different five-year time periods from 1855 to the present. The hurricanes are categorized according to the Saffir-Simpson Scale: major hurricanes (Category 3, 4 and 5) and regular hurricanes (Category 1 and 2.) The Y-axis shows the total number of hurricanes in each five-year period.
Behind the data
Hurricane Milton left a trail of destruction across Florida when it made landfall on Wednesday. The Category 5 storm came just two weeks after Hurricane Helene, which also caused widespread destruction and fatalities.
As the chart shows, the rising number of major hurricanes hitting the US since 2020, compared to the previous peak of seven major hurricanes between 1915 and 1919, is notable. With five major hurricanes already recorded this decade, and the National Oceanic & Atmospheric Administration (NOAA) yet to include hurricanes Helene and Milton, the tally will likely set a new record once updated. The increasing frequency of severe hurricanes points to broader patterns of climate volatility, which may be contributing to this trend.
China's economic stimulus sparks surge in tech investment
What the chart shows
This chart visualizes weekly net fund flows to China using data from Emerging Portfolio Fund Research (EPFR). The data is categorized into four groups of stock market sectors.
Behind the data
In late September, the People’s Bank of China (PBoC) announced an ambitious plan to revive the struggling Chinese economy by implementing significant fiscal stimulus. The market’s response was swift, with both institutional and retail investors substantially increasing their exposure to Chinese assets. By the end of September, these inflows had reached their highest level in 2024, signaling a renewed confidence in the country's economic outlook.
However, the inflows were notably sector-specific. While several sectors experienced a moderate uptick in interest, the technology and telecommunications sector attracted a disproportionately large share of the capital. Does this show of investor preference for tech-driven industries reflect optimism about China’s digital economy?
Chinese equities lead global markets amid stimulus-driven rally
What the chart shows
This chart displays the 2024 year-to-date performance of Chinese, regional and global equity indices, with a focus on quarterly performance. It gives a clear visual comparison of how these indices have fluctuated throughout the year.
Behind the data
In late September, China's stimulus—monetary easing and fiscal support signals—triggered rallies in Chinese equities. Large cap stocks, with significant representation in the consumer discretionary and communication services sectors, fueled market optimism, growing by about 22% in Q3 2024. During the same quarter, the MSCI China and CSI 300 indices also posted significant gains of about 21% and 16%, respectively.
However, as Q4 2024 began, skepticism surrounding the sustainability of fiscal expansion led to more cautious market sentiment, which tempered further gains in Chinese stocks. Despite this, Chinese equities continued to outperform both regional and global indices year-to-date.
China's automotive growth outpaces profitability, while US and Europe find balance
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What the chart shows
This scatter chart compares the compound annual growth rate (CAGR) over a 15-year period with the return on equity (ROE) of the Automobiles & Components industries in the US, Germany and China to show the potential for long-term financial growth and profitability across the three markets.
Behind the data
Last Friday, the EU Commission voted to impose definitive tariffs on China-made battery electric vehicles. The decision sparked mixed reactions, with many politicians supporting the move as a way to protect Europe’s automotive industry, while major European carmakers, such as Mercedes-Benz and BMW expressed concerns over potential market disruptions and cost increases. This European initiative mirrors a similar action taken by the US earlier this year and is seen as a direct response to China’s rapid expansion in the global auto market, driven by competitively priced vehicles.
The chart shows the impact of these measures. Both US and European carmakers show a positive correlation between CAGR and ROE, meaning that as profitability (ROE) increases, so does the long-term growth rate (CAGR). In contrast, the Chinese automotive industry demonstrates an inverse relationship, where a higher CAGR is associated with a lower ROE. This trend may indicate that Chinese carmakers are prioritizing rapid expansion and market share over short-term profitability, particularly as they aggressively price their vehicles to compete in global markets.
US dollar weakens against Asian currencies as Fed begins rate cuts
What the chart shows
This chart displays the year-to-date (YTD) performance of the US dollar (USD) against a range of global currencies. It ranks currencies from the largest YTD appreciation to the largest depreciation.
Behind the data
As the US labor market has been showing signs of softening and the Federal Reserve (Fed) has started its easing cycle with an oversized rate cut, the USD’s strength has begun to unwind. While the US Dollar Index (DXY) has remained above 100, the dollar has depreciated significantly against several Asian currencies, including the Malaysian ringgit (MYR) and Thai baht (THB), with drops of 5-8%. Conversely, the USD has appreciated the most against Latin American currencies like the Mexican peso (MXN), as well as the Turkish lira (TRY). As the Fed continues its dovish policy, the USD may face further downward pressure.
US labor market weakens as majority of states face rising unemployment
What the chart shows
This chart tracks unemployment trends from January 2019 to August 2024 for all 50 states in the US as a group. It highlights whether their unemployment rate has increased, decreased or remain unchanged compared to the previous month. According to the latest data recorded, 31 states experienced an increase in unemployment, five saw a decrease, and 14 had no change.
Behind the data
The US jobs market is showing signs of softening. The national unemployment rate has climbed from a low of 3.4% in 2023 to 4.2% as of October 2024. This increase has not been spread evenly across states. Rhode Island, South Carolina and Ohio have seen the largest increases in their unemployment rate over the past year, each climbing by more than a percentage point. Conversely, unemployment rates have fallen in Arizona, Mississippi, Connecticut, Wisconsin, Iowa, Maine, Tennessee, Arkansas and Hawaii.
Given that promoting maximum employment is one of the Fed’s dual mandates, continued labor market deterioration could prompt more aggressive interest rate cuts from the Federal Open Market Committee (FOMC).
Chinese 10-year bonds show low sensitivity to global macro factors
What the chart shows
This chart illustrates the sensitivity of the 10-year Chinese government bond (10y CGB) to various global macro factors including GDP growth, inflation expectations, central bank policies, credit markets, and commodities, based on data from Quant Insight. Sensitivity coefficients show how many basis points (bp) the bond yield could change for each one standard deviation (s.d.) shift in a macro factor, with data spanning the past ten years.
Behind the data
Overall, the 10y CGB shows low sensitivity to global macro factors, with yield fluctuations typically within ±1 bp for a one s.d. shift. However, certain factors have had more pronounced impacts recently. For example, iron ore prices and expectations of quantitative tightening by the Bank of Japan (BoJ) have been linked to positive effects on the bond yield, while copper prices and European Central Bank (ECB) rate expectations have contributed to more negative consequences. These insights could be useful for positioning Chinese sovereign bonds.
Global trade under pressure as shipping rates soar amid port strikes
What the chart shows
This chart compares global trade growth with key shipping rate indices to highlight the relationship between global trade activity and fluctuations in shipping costs, which can serve as a key indicator of supply chain pressures.
Behind the data
Shipping has become a major issue in recent years, impacted by events such as the pandemic, the Suez Canal blockage, and now the latest concern: the International Longshoremen’s Association (ILA) strike. Nearly 50,000 ILA members have walked off the job, halting operations at ports along the East and Gulf Coasts. This disruption has affected the flow of a wide range of goods, from perishable items like bananas and European alcohol to cars, furniture and industrial parts, potentially leading to shortages and price hikes. While many holiday goods have already been shipped, continued delays could drive up prices for perishable products and other imports, further straining supply chains and fueling inflation.
Energy stocks strongly correlate with crude oil prices but not with other sectors
What the chart shows
This chart displays the daily return correlation over the past year between MSCI US and European sectoral indices and crude oil prices (WTI and Brent). It highlights sector sensitivity to oil price movements and shows how crude oil may impact sector performance in the US versus Europe.
Behind the data
The results show strong positive correlations between energy sector equities and crude oil returns in both the US and Europe, with coefficients ranging from approximately 0.5 to 0.6. In contrast, other sectors exhibit relatively low correlations with crude, with some showing small positive or negative coefficients. While crude prices play an important role in energy stock valuations, they appear to have little influence on most other sectors.
Hedge funds lag global equity benchmarks
What the chart shows
This table presents a heatmap comparing the year-to-date (YTD) and recent performance of various hedge fund strategies – such as absolute return, multi-strategy, systematic diversified, market directional, multi-region, and fundamental growth equity – against global equity benchmarks.
Behind the data
The heatmap reveals that these hedge funds have generally underperformed stock benchmarks like the S&P 500, MSCI World, and MSCI EM indices, possibly driven by factors such as the rise of AI, the resilience of the US economy amid recent softening, continued Fed’s accommodation, and renewed stimulus from China.
So, despite being exposed to higher risks, hedge funds did not necessarily outperform equities during this period.
PBoC stimulus counters manufacturing contraction amid mixed PMI signals
What the chart shows
This table provides a detailed breakdown of China’s Purchasing Managers’ Indices (PMIs) from both the National Bureau of Statistics (NBS) and Caixin, covering composite, manufacturing and services sectors. It also includes components of the NBS PMI indices. All are heat-mapped based on their percentile ranks across all available historical data.
Behind the data
The People's Bank of China (PBoC) has announced monetary stimulus that includes cutting the reserve requirement ratio (RRR) by 0.5 percentage points. It also plans to implement further interest rate reductions and inject approximately 1 trillion yuan of long-term liquidity into the economy. This move has helped alleviate concerns about economic activity, as indicated by discrepancies between the NBS and Caixin PMIs and deteriorations in several official PMI components shown in the table.
The Caixin PMI has recently shown expansion. However, the official PMIs reported by the NBS have indicated contractions in manufacturing, despite slight expansions in non-manufacturing. Across various components, contractions can be observed across the board, except for business expectations, which remain in expansion.
China’s growth target at risk
What the chart shows
This chart depicts China’s real GDP growth from 1994 to 2024, along with two measures of potential growth rates: one calculated using the Hodrick-Prescott (HP) filter – which extracts a trend from economic cycles – and another based on a post-global financial crisis (GFC) trend projected into the next 12 months.
Behind the data
Despite the government’s 5% economic growth target, China’s economy has been encountering challenges in real estate, post-COVID activity recovery, the labor market and other areas. These issues suggest that the target may not be attainable.
Additionally, the country’s potential growth rates support this concern: The HP filter indicates a potential growth rate of 4.5%, while the post-GFC trend projects growth falling below 4% in the next 12 months.
Russia and Japan buck trend of global rate cuts
What the chart shows
This table presents the key interest rates of central banks from G10 countries, China and Russia, along with the percentage of inverted spreads for each economy based on term spreads between 1-year to 10-year government bonds. Most central banks have begun their rate-cutting cycles, with exceptions being Australia, Japan and Russia. Notably, Russia and Japan have implemented rate hikes in recent months. Interestingly, while the Russian yield curve is fully inverted – indicating that all spreads between short-term and long-term bonds are negative – Japan's yield curve shows no inversion at all.
Behind the data
The widespread initiation of rate-cutting cycles among central banks reflects a global shift toward monetary easing in response to slowing economic growth amid inflation concerns. The inversion of yield curves in several economies, such as the US (46.7% inverted spreads), the UK (53.3%) and various euro area countries, signals market expectations of future economic slowdowns and potential further rate cuts. Russia's fully inverted yield curve, despite recent rate hikes, may indicate that investors expect future rate reductions or harbor concerns about the country's long-term economic prospects. In contrast, Japan's lack of yield curve inversion, even after rate hikes, suggests that the market anticipates steady economic conditions or aligns with the central bank's optimistic outlook.
US yield curve gradually dis-inverting in 2024
What the chart shows
This chart analyzes the US yield curve from 2015 to 2024, focusing on the percentage of the curve that is inverted. The different colors depict various types of term spreads.
Behind the data
The data reveals that throughout 2024, the US yield curve has been gradually dis-inverting, indicating a shift toward a more normal yield curve structure. In the early part of the year, the proportion of spreads inverted by more than 50 basis points remained steady, suggesting sustained investor concerns about economic slowdown or later rate cuts. However, more recently, even these deeply inverted spreads have begun to decrease. This movement toward upward sloping—where longer-term yields exceed shorter-term yields—reflects growing market optimism about future economic conditions. The dis-inversion across the yield curve may signal expectations of stronger economic growth or a change in monetary policy stance by the Federal Reserve.
Quant Insight data reveals euro’s valuation gaps against global currencies
What the chart shows
This chart showcases Macrobond’s newly integrated Quant Insight dataset, offering a detailed analysis of currency sensitivities against the euro. Macro sensitivities are interpreted such as that a one standard deviation change in a macroeconomic factor will result in an x% change in the currency pair’s exchange rate.
Behind the data
This analysis of the euro's valuation against 22 different currencies reveals that euro vs. Malaysian ringgit is the most undervalued pair, with a -4.5% gap from fair value, suggesting potential appreciation of the euro against the ringgit. Conversely, the euro is most overvalued against currencies like the Russian ruble and Mexican peso, indicating possible future depreciation relative to these currencies.
By using this dataset, we can identify trends and relationships in key drivers such as commodity prices, credit risk indicators and market volatility.
S&P 500 maintains growth amid moderate volatility
What the chart shows
This chart displays the S&P 500's annual return growth, VIX intra-year highs, and maximum drawdowns, from 1990 to the present.
Behind the data
Although markets have experienced some selloffs and uncertainties due to recurring recessionary fears, the data shows that markets are still far from extreme pessimism.
The S&P 500's year-to-date return growth remains positive. The VIX index, although spiking occasionally, closed highest at 38.6% during this year, notably lower than its significant highs. Meanwhile, the year-to-date maximum drawdown is -8.5%, which seems typical compared to previous norms.