0 Past Performance Is Not Necessarily Indicative Of Future Results. McVEAN Trading & Investments, LLC
Drury
McVean Trading and Investments, LLC JULY 12, 2023
OUR KEY LEAD INDICATOR IS PROFITS Michael
Chief Economist
• NO US RECESSION IN NEXT FOUR QUARTERS – REST OF WORLD AT RISK
• US INFLATION FALLS TO UNDER 3% BEFORE THE END OF THE YEAR -- ROW HMMM…
• BUT, THE FED REMAINS VIGILANT - WITH NO EASE BEFORE MID-2024
KEY TAKEAWAYS
1 Past Performance Is Not Necessarily Indicative Of Future Results.
Past Performance Is Not Necessarily Indicative Of Future Results.
MONEY CONTRACTING AFTER BOOM –
2
1921, 1937, 1948?
OUR KEY LEAD INDICATOR IS PROFITS
CORPORATE AND NONCORPORATE MARGINS
CORP GDP - CORP. INDIRECT TAXES, DEPR., COMP, INTEREST AND TRANSFERS/ CORP GDP
GDP - TAXES, DEPR, COMP, TRANSFERS AND INTEREST - CORP PROFITS/ (GDP- CORP GDP)
SOURCE: BEA
Past Performance Is Not Necessarily Indicative Of Future Results.
3
13.0% 17.0% 21.0% 25.0% 29.0% 7.0% 11.0% 15.0% 19.0% 23.0% Jun-60 Jun-65 Jun-70 Jun-75 Jun-80 Jun-85 Jun-90 Jun-95 Jun-00 Jun-05 Jun-10 Jun-15 Jun-20
X
COMPENSATION THROUGHOUT THE RECOVERY
Past Performance Is Not Necessarily Indicative Of Future Results.
SOURCE: BLS
NOMINAL GDP HAS EXCEEDED
4
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18 Mar-20 Mar-22
CURRENT QTR %CH FROM YEAR AGO QTR GDP COMPENSATION
GDP GROWTH VS COMPENSATION GROWTH
PRICES RISING FASTER THAN UNIT LABOR COSTS
UNIT LABOR COSTS NONFARM BUSINESS DEFLATOR SOURCE:BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
5
• SOU -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% Mar-00 Mar-04 Mar-08 Mar-12 Mar-16 Mar-20 UNIT LABOR COSTS VS INFLATION YEAR / YEAR CHANGE
CORPORATE SAVINGS STILL ELEVATED SUPPORTED BY CONSUMER
SECTOR BALANCES
AS A PERCENT OF GROSS DOMESTIC PRODUCT
SOURCE: BEA
FOREIGN BALANCE HOUSEHOLD BALANCE GOVERNMENT BALANCE CORPORATE BALANCE
Past Performance Is Not Necessarily Indicative Of Future Results.
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-24.0% -18.0% -12.0% -6.0% 0.0% 6.0% 12.0% 18.0% 24.0% Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
A PAUSE NOW, NOT RECESSION LATER
Past Performance Is Not Necessarily Indicative Of Future Results.
7
0.380 0.420 0.460 0.500 0.540 0.580 0.620 0.660 0.700 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22
NON-MANUFACTURING
MONTH AVERAGE MANUFACTURING ISM NON-MANUFACTURING ISM
MANUFACTURING &
ISM NEW ORDERS INDEX THREE
Past Performance Is Not Necessarily Indicative Of Future Results.
8
GLOBAL MANUFACTURING RECESSION
Past Performance Is Not Necessarily Indicative Of Future Results.
2% + QUARTER 9
ANOTHER
RIGHT ON SCHEDULE
REAL GDP VS TREND
Past Performance Is Not Necessarily Indicative Of Future Results.
SOURCE: BEA
10
15,000 16,000 17,000 18,000 19,000 20,000 21,000 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
REAL GDP 1.66% TREND
BEST GUESS 1.4% PRODUCTIVITY
NONFARM BUSINESS PRODUCTIVITY GROWTH
SOURCE: BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
11
-2.5% 0.0% 2.5% 5.0% 7.5% Mar-05 Mar-08 Mar-11 Mar-14 Mar-17 Mar-20 Mar-23
4 QTR CHANGE 3 YR AVG = 1.4% 2.8% 0.3% 0.9% 1.6% 1.4%
NO INFLATION – JUST SQUEEZING THE BALLOON
12
Performance Is Not Necessarily Indicative Of Future Results.
Past
-0.02 -0.01 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 -25.0% -17.5% -10.0% -2.5% 5.0% 12.5% 20.0% 27.5% 35.0% Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
INFLATION CHANGE FROM SAME MONTH
AGO 60/40 RETURN
SOURCE: BLOOMBERG,BLS
BLOOMBERG 60/40 PORTFOLIO VS
ONE YEAR
PCE DEFLATOR
SOURCE: BLOOMBERG
Past Performance Is Not Necessarily Indicative Of Future Results.
13
CRUDE IN LOW SEVENTIES
Past Performance Is Not Necessarily Indicative Of Future Results.
GRAINS WELL PAST PEAK 14
SOURCE: BLOOMBERG
GOODS PRICES HEADED UNDER ZERO
SOURCE: ISM, BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
15
-6.0% -3.0% 0.0% 3.0% 6.0% 9.0% 12.0% 0.10 0.30 0.50 0.70 0.90 1.10 1.30 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Jan-23
ISM MANUFACTURING INDEX VS INFLATION
PRICES PCE GOODS DEFLATOR
SUPERCORE COOLING TO UNDER 3%
SERVICES ISM PRICE INDEX VS SUPERCORE INFLATION
SERVICE ISM PRICES SUPERCORE INFLATION (BLS)
SOURCE: ISM, BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
16
0.0% 1.5% 3.0% 4.5% 6.0% 7.5% 0.40 0.50 0.60 0.70 0.80 0.90 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
AND RENTS WILL FOLLOW HOME PRICE
APPRECIATION VS RENT HIKES CURRENT
EXISTING HOME PRICE OWNERS EQUIVALENT RENT SOURCE: NAR, BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
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-1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% -16% -12% -8% -4% 0% 4% 8% 12% 16% Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19 Jan20 Jan21 Jan22 Jan23
MO % CH FROM YEAR
AGO
18 Past Performance Is Not Necessarily Indicative Of Future Results. 4.2 -1.7 + ? = -0.1% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 PCE INFLATION MEASURES ONE MONTH CHANGE PCE DEFLATOR PCE CORE Source: BEA EXP FROM CPI
3.4% HEADLINE PCE DEFLATOR IN AUGUST?
LOW PAY WAGES STRONG, HIGH PAY WEAK
Past Performance Is Not Necessarily Indicative Of Future Results.
SOURCE: BLS
19
1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22 AVERAGE HOURLY EARNINGS 3 MO AVG % CH FROM YEAR AGO 3 MO AVG PRIVATE SECTOR NONSUPERVISORY
MORE CHEAPER FOREIGN LABOR
TRADE DEFICIT / GDP
Past Performance Is Not Necessarily Indicative Of Future Results.
20
2.00% 2.50% 3.00% 3.50% 4.00% 4.50% Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
SOURCE: BEA
SOURCE: BLOOMBERG
Past Performance Is Not Necessarily Indicative Of Future Results.
21
MADE EVEN CHEAPER BY STRONG DOLLAR
“RICHCESSION” LIKELY A PERSISTENT FACT
BLOOMBERG 60/40 PORTFOLIO / PCE DEFLATOR MONTHLY
Past Performance Is Not Necessarily Indicative Of Future Results.
22
50 100 150 200 250 300 1/31/2007 1/31/2009 1/31/2011 1/31/2013 1/31/2015 1/31/2017 1/31/2019 1/31/2021 1/31/2023
AVERAGE
SOURCE: BLOOMBERG, BLS
UNEMPLOYMENT RATE VS JOBS HARD TO GET CURRENT MONTH LEVEL
CONFERENCE BOARD'S JOBS HARD TO GET (SA) CIVILIAN UNEMPLOYMENT RATE (BLS)
Past Performance Is Not Necessarily Indicative Of Future Results.
TIGHT 23
LABOR MARKETS REMAIN
2.5% 4.5% 6.5% 8.5% 10.5% 12.5% 5 17 29 41 53 65 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19 Jan-22
SOURCE: CONFERENCE BOARD, BLS
WORK WEEK BACK TO PRE-COVID NORM BUT DIFFERENT MIX
ALL WORKERS NONSUPERVISORY WORKERS
SOURCE: BLS
Past Performance Is Not Necessarily Indicative Of Future Results.
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33.2 33.4 33.6 33.8 34.0 34.2 34.4 34.6 34.00 34.20 34.40 34.60 34.80 35.00 35.20 35.40 AVERAGE WORK WEEK MONTHLY
BANKS ARE ADAPTING MUCH FATTER MARGIN ON NEW MORTGAGES
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 1/1/1976 1/1/1981 1/1/1986 1/1/1991 1/1/1996 1/1/2001 1/1/2006 1/1/2011 1/1/2016 1/1/2021
MORTGAGE RATES - US 10YR YIELDS
25 Past Performance Is Not Necessarily Indicative Of Future Results.
Bloomberg
Source:
BIG GUYS HAVE A DIFFERENT FINANCING COST THAN OTHERS
SOURCE: BLOOMBERG
26 Past Performance Is Not Necessarily Indicative Of Future Results. 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 S&P 500
RUSSELL 2000
27 Past Performance Is Not Necessarily Indicative Of Future Results. 500 700 900 1100 1300 1500 1700 1900 2100 2300 2500 1/9/2009 1/9/2011 1/9/2013 1/9/2015 1/9/2017 1/9/2019 1/9/2021 1/9/2023
SMALLER GUYS SUFFER
SOURCE: BLOOMBERG
NFIB EARNINGS VS EXPECT ECONOMY UP POSITIVE RESPONSES MINUS NEGATIVE
EXPECT ECONOMY UP ACTUAL EARNINGS
Past Performance Is Not Necessarily Indicative Of Future Results.
OUTLOOK POOR, EARNINGS MEH 28
NFIB
-50 -40 -30 -20 -10 0 10 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 Jan-86 Jan-91 Jan-96 Jan-01 Jan-06 Jan-11 Jan-16 Jan-21
SOURCE: NFIB
NEXT SHOCK OR POLICY ERROR? UP AS LIKELY AS DOWN
• NOT FISCAL UNTIL AFTER NEXT ELECTION
• FED ALMOST DONE – AND 50 BP IS NOTHING AFTER 500!
• STUDENT LOANS AND DEBT CEILING KICKED INTO 2024
• OUTSIDE US: CHINA SLUMP HURTS WORLD, BUT HELPS US
• EUROPE: RECESSION OR PEACE BREAKS OUT?
• ROW: OPEC BECOMES AN EFFECTIVE CARTEL?
• ASEAN & INDIA FLOURISH ON GLOBAL CAPITAL FLOWS
• AI? CLIMATE CHANGE? TAIWAN? FINANCIAL BLACK SWAN?
29 Past Performance Is Not Necessarily Indicative Of Future Results.
