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7 charts from the past week that tell an interesting story in markets and investing…
1) USA! USA! USA!
US equity domination continues with the ratio of US stocks to non-US stocks surging to another all-time high.
Over the last 10 years, US stocks ($SPY) have nearly quadrupled (+297%) versus a 65% return for international equities ($ACWX).
The S&P 500 crossed above 4,400 this week for the first time, more than doubling its pandemic low from March of last year (2,191).
Friday’s record high was the 40th of the year which is on pace for the most since 1995.
2) China Crash Continues
Fears over China cracking down on yet another industry sent education stocks tumbling this week. On Friday alone, $EDU (New Oriental Education) was down 54%, $GOTU (Gaotu Techedu) down 63%, and $TAL (TAL Education) down 71%. Shares of these companies are now down 80-90% year-to-date.
What is the concern? In a “worst-case scenario,” China could ban teaching on weekends and holidays and force these companies to become non-profits. China has said it wants to “ease the financial burden” associated with child-rearing, including the cost of education. And in recent months, authorities have called for less homework and after-school tutoring for students, saying “we shouldn’t let an industry with social conscience become a profit-seeking one.”
The divergence with US equities has become stark. While US Internet stocks ($FDN) ended the week at all time highs (+18% YTD), Chinese internet stocks ($KWEB) ended the week at 52-week lows (-28% YTD).
3) The Shortest Recession in History
It’s official. The NBER announced this week that the US economic downturn bottomed in April 2020, making it the shortest recession in history at just 2 months.
4) Snap’s Surge
A year ago, Twitter and Snapchat both had a market cap of $30 billion.
After reporting earnings this week, Snapchat jumped to a market cap of $122 billion, more than double that of Twitter ($57 billion).
Why the large gap?
Growth expectations for $SNAP are considerably higher than $TWTR…
- Snapchat is now trading at 36.5x TTM revenue of $3.34 billion.
- Twitter is trading at 12.6x TTM revenue of $4.45 billion.
Snapchat’s 23% increase in daily active users (DAUs) over the past year was more than double Twitter’s 11% increase in monetizable DAUs, and investors seem to be expecting this trend to continue.
5) Housing Boom Continues
US Existing Home Prices were up 23.4% over the last year, the 2nd highest rate of increase ever (highest was 23.6% in May).
Median Home Prices in the US of $363,300 are more than double their value from 10 years ago ($175,600).
Supporting the advance are three factors: 1) sky-high demand due to stimulus payments, 2) extremely low supply, and 3) record low mortgage rates.
Buyers can now get a 15-year mortgage for 2.12%, another all-time low.
Meanwhile, in a conundrum for the ages, the Fed continues to buy mortgage bonds (new high of $2.422 trillion this week) in an effort to hold down rates and “stimulate” a housing market that needs no assistance.
6) Used Car Craze
How about this for crazy stat: the average price of a 1-year old used car is now only $80 less than the price of a brand-new vehicle. That difference is typically $5,000 or more. There are some used cars that are actually selling for higher prices than when they were new.
7) Delta Difficulties
The Delta variant is leading to another wave higher in global covid-19 prevalence, with the US seeing a similar rise. Average daily cases in the US are now 4x higher than they were a month ago with a continued rise expected in the next few weeks.
The data thus far points to Delta being more contagious than prior strains with higher odds of infection even among those that are vaccinated. The good news? the odds of severe illness are still substantially lower when vaccinated, with a recent study out of England showing the Pfizer vaccine to be 96% effective against hospitalization and AstraZeneca at 92%.
The result is likely to be falling fatality rates, as cases rise sharply but we don’t see a commensurate rise in hospitalizations and deaths.
We’re seeing that in the UK’s Delta wave thus far with 47,000 daily cases and 57 daily deaths on average. In early January with a similar number of cases there were over 600 daily deaths.
We are seeing the same in the US, with the case fatality rate (CFR) from covid-19 falling to new pandemic lows.
With over 90% of those 65 and older in the US now vaccinated (this group has represented over 80% of covid-19 deaths), even if cases continue to rise, the hope is that severe illness will be substantially lower than prior waves.
And that’s it for this week. Thanks for reading.
Have a great weekend everyone!
-Charlie
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