Weekly Insights -Nov 13, 2023
Weekly Economic Recap
Sentiment Deteriorates as Consumers Being Squeezed
The U.S. trade deficit widened the most in five months in September. Exports of goods and services climbed to the highest level since August 2022, with exports of capital goods increasing to its highest level on record.
Consumer credit increased in September after a sharp drop in August. Revolving credit (e.g., credit cards) led the gains, rising for the 28th time in the past 29 months.
The NY Fed Survey showed U.S. total household debt levels increased in 3Q23 as consumers turned to credit cards to fuel their spending. Credit card borrowing rose by 4.7% to $1.08 trillion during the quarter, equating to an increase of $154 billion over the last year, the largest increase in the history of the data. Debt delinquencies increased by 3%.
Wholesale inventories unexpectedly increased in September at the fastest monthly pace in 10 months. Inventories of durable goods increased the most, led by machinery and automotive goods.
The preliminary reading on the University of Michigan Consumer Confidence Index declined for the fourth straight month in November. The decline was led by confidence on current economic conditions which fell at the fastest pace since November 2022. In addition, one year ahead inflation expectations rose to 4.4%, the highest level since April. Long-run inflation expectations (5-10 years) increased to the highest level since 2011.
Weekly Market Recap
U.S. Leads Equity Rally; Weak Demand Sends Yields Higher
Equities: The MSCI AC World Index rose for the second consecutive week, the first back-to-back weekly equity gains in four months. However, the rally was not broad based as both developed international equities and emerging market equities were flat to lower for the week. Within the U.S., the rally was concentrated in technology and large cap growth. The Nasdaq posted its best back-to-back weekly gains in eight months.
Fixed Income: The Bloomberg Barclays Aggregate Index declined for the first time in three weeks as weak demand at Treasury auctions pushed yields higher. Treasuries led the weakness while investment grade and municipal bonds prices rose for the week.
Commodities/FX: The Bloomberg Commodity Index fell for the third consecutive week and posted its worst one week drop in eight months. Mixed economic data has fueled fears of demand for commodities. Crude oil led the weakness. Crude oil has approached bear market territory (-20% or more from its September high). 