SURVEY OF CONSUMER EXPECTATIONS
- Median inflation expectations remained unchanged at 5.0 percent at the one-year horizon, decreased by 0.3 percentage point to 2.7 percent at the three-year horizon, and rose 0.1 point to 2.5 percent at the five-year horizon, according to the January Survey of Consumer Expectations.
- Median expected growth in household income dropped by 1.3 percentage point to 3.3 percent, the largest one-month drop in the series’ history. The series, however, remains well above its pre-pandemic levels.
At a Glance: Findings from the December SCE Household Spending Survey
- The median reported year-over-year increase in monthly household spending declined to 7.7 percent in December, down from its series high of 9.0 percent in August 2022. The decrease was broad-based across age, education, and income groups.
- The share of households that reported making a large purchase over the past four months decreased from 61.7 percent in August to 56.4 percent in December. While the share of those making large purchases on home appliances, electronics, and furniture rose in December, the share spending on vehicles, home repairs, homes, and vacations fell.
- The median expected monthly overall spending growth over the next twelve months declined to 4.0 percent from 4.4 percent in August, its lowest reading since April 2021. The decrease was most pronounced for those with household incomes over $100,000.
- The median expected year-ahead change in everyday essential spending (that is, daily living expenses) dropped from 5.6 percent in August to 5.2 percent in December, its lowest reading since April 2021, but above its pre-COVID levels. The median expected change in non-essential spending also declined from 1.8 percent in August to 1.7 percent in December.
- The average reported likelihood of making a large purchase over the next four months increased for home appliances and electronics, but decreased for furniture, home repairs, vacations, vehicles, and homes.
SLOOS WOOS!
The Senior Loan Officer Opinion Survey (SLOOS) indicated that bank lending standards tightened further in 2022Q4. We have previously found that the SLOOS is an early indicator of investment growth, so the recent tightening to levels unseen outside of recessions could signal weaker growth later this year.
(Goldman Sachs)
Oil Declines on US Requirement to Sell More Crude From the SPR The US is looking to sell 26 million barrels from the Strategic Petroleum Reserve in accordance with a budget mandate enacted in 2015.
Retail investor risk appetite improves with AI stocks leading Some of Wall Street’s most speculative names, including meme stocks and shares of artificial intelligence companies, are leading the equity market rally this year, helped by renewed interest from retail investors.
Retail investors had a poor year in 2022, with the average portfolio ending the year down around 35% from all-time highs, Vanda Research previously estimated.
However, retail investors have shown renewed interest in the early part of 2023. Aggregate inflows into the U.S. stock market, though concentrated in a few names, has reached levels last seen in 2020-21, according to Vanda Research. (…)
“Investor enthusiasm is also attracting short-sellers that are skeptical about some of the resulting valuations,” said Evan Niu, an analyst at Ortex, which tracks real-time short interest data. (…)
Yesterday, David Rosenberg pointed out that YtD:
The heaviest shorted stocks are up +21%, tripling the overall market.
• Short sellers have covered $51 billion of their bearish bets, equivalent to 6% of the total volume of short activity.
• Cyclicals have beaten defensives by +1,700 basis points.
• Companies with no profits are up +27%.
• Bitcoin and ARK at one point were both up more than +40%.
• The bonds for the worst balance sheet companies in the high yield index returned +9% (annualize that and it’s more than a double!).
Regulators Turn Up Heat on Crypto’s Biggest Players Officials have cut off access to products and services that are vital to the digital-currency business, while banking regulators are pushing lenders to cut ties with crypto customers, limiting their ability to plug into the financial system.
On Monday, New York regulators shut down new issuance of the world’s third-largest stablecoin, BUSD, prompting investors to flee the coin and raising worries about the future of crypto exchange giant Binance, which gives the coin the “B” in its name.
Binance’s partner in issuing the coin, Paxos Trust Co., is facing a potential Securities and Exchange Commission lawsuit. A few days earlier, the SEC fined the parent of another big crypto exchange, Kraken, and forced it to stop offering a popular type of crypto-yield product to U.S. investors. Banking regulators are quietly pushing banks to cut ties with crypto customers, limiting their ability to plug into the real-world financial system. (…)
Over a 24-hour period from Sunday to Monday, there were $2.7 billion worth of outflows from Binance, according to blockchain data provider Nansen. On Monday morning, some $144 million worth of BUSD were redeemed for dollars, according to Nansen. Paxos said Monday it “categorically disagrees” with the SEC’s assertion that BUSD must comply with federal securities laws.
Binance’s in-house token, BNB, tumbled 8% on Monday, according to CoinMarketCap.com. The coin is often seen as a gauge of investors’ perceptions of Binance.
The scope of such actions suggests that the SEC and other regulators want to rein in pillars of the crypto market such as stablecoins—digital coins that maintain a price of $1—and staking, a common way for investors to earn interest on their crypto. (…)
Last week, Binance said it would suspend U.S. dollar bank transfers. The move came after the exchange said its banking partner, Signature Bank SBNY 0.57%increase; green up pointing triangle, would no longer support crypto transactions below $100,000. (…)
The [Kraken] case suggests that the SEC might force other companies to stop offering access to staking, a practice in which investors lock up their digital assets such as ether or solana in return for an interest rate-like yield. The loaned assets allow the borrowers to facilitate transactions on the assets’ underlying blockchain network.
“This really should put everyone on notice in this marketplace,” SEC Chair Gary Gensler said on CNBC last week. (…)