Retail Sales/ Consumer Credit/ Housing Prices/ Indices/ Small Business Outlook
Retail Sales
Today, Valentines Day, Retail Sales were released by the US Census Bureau and they disappointed estimates.
The one that we would like to point out is the Control Group. 1.1% miss to expectations is a big miss, and more importantly it goes into the calculations of other macro indices. We are no experts on the exact math, but shortly after that number was reported the Atlanta Fed updated their GDP Now estimate. Now, we are only ½ way through Q1, but they revised down their Q1 GDP estimate from +2.9% to +2.3% which we thought worthy of mention.
Consumer Credit
Juxtapose the January Retail Sales numbers discussed above with Consumer Credit numbers from December.
Last week Consumer Credit MoM (Non-Mortgage) was released.
Obviously, seasonality plays a role in this number, the holidays, and all, but at almost 9X the December average, the metric is notable.
Another reason it was noticeable:
That was actually the largest addition ever.
Reminded us of a chart we presented recently showing large private debt as well as the present interest rate level.
Now, let’s add the cost of that debt at the present interest rate level to see what the gross $ amount looks like. Simple math for perspective, $1.38 trillion at 21.47% interest rate equals $296 Billion in interest costs.
That’s an 80% increase in interest costs between pre- and post-pandemic, born entirely by the individual consumer.
Retail Sales increased 39% from pre Covid until recently, the amount of interest owed, not including principle, has increased by 80%. That’s more than double that sales metric. At what point will this begin to impact the consumer’s purchasing power?
Housing Prices
We have pointed out the impact of housing’s prices on inflation metrics before, but we think there is one chart worth updating.
Not since the GFC has this index seen these levels.
On a seasonality basis this metric has not been this bad since 2009.
Indices
A couple of random notes caught our eye this week. We mention this, because in a nonlinear way, we believe they are related.
Last weekend, Bloomberg ran an article discussing the economics of different Hedge Fund business models.
The following chart was included:
In this day and age of increased transparency, it makes us wonder if public endowments and pension funds will become increasingly cost sensitive to their investment choices?
Then, we came across the Bill Ackman letter that included a fair amount of informative charts. This one in particular caught our eye.
Passive funds now represent more than half of all mutual fund and ETF assets, making inclusion in the indices they track increasingly important.
So, if we consider the concept of price consciousness from the first point above, and the trend direction of index fund flows from the 2nd point above, the relevance of popular benchmarks/Indexes will become ever more important. It could prove to be a virtuous or vicious cycle, depending on adds and deletes.
It makes us wonder if keeping an eye on the particular companies, whether public or private, that oversee the construction of popular indexes might not be a wise move?
Small Business Outlook
The NFIB recently released a bunch of their Indices. We like to keep an eye on a few. One stood out this week: The Small Business Outlook for General Business Conditions. It has had quite a run.
For perspective we wanted to see the last time the outlook was this good. It may come as no surprise that it was back in 2016.
Notice the similar vertical incline?
Funny enough they have something in common.
We add the SPX Fwd. estimates for this reason. In the 3 years before the pandemic struck, or prior to the AI phenomena, the estimates moved up by 52%. Maybe this is just coincidence, or maybe not, but it’s hard not to notice the improved sentiment out there after the first 20 days of President’s second term.
Have a great long weekend!
Best,
Meraki Trading Team
About Meraki Global Advisors
Meraki Global Advisors is a leading outsourced trading firm that eliminates investment managers’ implicit and explicit deadweight loss resulting from inefficient trading desk architectures. With locations in Park City, UT and Hong Kong, Meraki’s best-in-class traders provide conflict-free 24×6 global trading in every asset class, region, and country to hedge funds and asset managers of all sizes. Meraki Global Advisors LLC is a FINRA member and SEC Registered and Meraki Global Advisors (HK) Ltd is licensed and regulated by the Securities & Futures Commission of Hong Kong.
For more information, visit the Meraki Global Advisors website and LinkedIn page
Contact:
Mary McAvey
VP of Business Development
