Normally, 200 ships travel through the Suez Canal from south to north over a week, but that number has recently declined to 100, see the first chart.
For the Panama Canal, northbound traffic has also declined 50%, from 90 ships per week to 45, see the second chart.
The third chart shows that the price of transporting a container from Shanghai to Rotterdam has tripled.
The bottom line is that higher transportation costs are putting upward pressure on goods inflation.
The median age of repeat homebuyers has increased from 36 years old in 1980 to 58 years old in 2023, see chart below.
And the median age of first-time homebuyers has increased from 29 to 35 over the same period.
The Fed pivot has restarted the hunt for yield, see chart below. The question for markets is whether the associated rebound in housing, hiring, and capital markets activity will trigger a rebound in inflation.
The story in markets in 2023 was that US growth expectations were first revised down and then revised up after the easing in financial conditions following SVB in March, see the first chart below.
With the significant easing in financial conditions since November, we are beginning to see the same pattern in 2024, see the second chart.
The performance has been different in Japan and Europe, where growth expectations have been steady in Japan and revised significantly lower in Europe.
In other words, the lack of a slowdown in 2023, which surprised the Fed, the consensus, and markets, was only a US story, and we are starting to see the same pattern play out again in 2024.
The rally in rates and credit after the Fed pivot has pushed up the share of single-B and BB loans priced above par, see chart below.
The ongoing easing of financial conditions continues to point to a reacceleration in growth over the coming months, see chart below.
Comparing the P/E ratio of the S&P 500 with the P/E ratio of the rest of the world shows a record difference, see chart below.
In other words, US equities have never been more expensive relative to international equities.
Since the Fed started raising rates in March 2022, the amount of money in money market funds has increased from $4.5 trillion to $6 trillion, see chart below.
With the Fed cutting rates over the coming quarters, we will likely see some of the $6 trillion leave overnight risk-free fixed income and flow into other asset classes such as equities, credit, and duration.
The record-high $6 trillion in money market accounts is likely a tailwind to equities, credit, and rates, and ultimately the economy—in particular hiring, housing, and inflation.
Foreign-born employment in the US is back at the pre-pandemic trend, and native-born employment is still 6 million jobs below the pre-pandemic trend, see the first two charts below.
In other words, the post-Covid normalization in the labor force participation rate has mainly been driven by immigration.
At the same time, the number of retired individuals has remained on trend, see the third chart.
The bottom line is that even taking into account that about 1 million died from Covid, there are still around 5 million native-born workers missing.
These 5 million missing workers are the reason why the labor market is tight and why wage inflation is likely to remain elevated.
Put differently, there is still plenty of room for job growth.
Looking at job growth since the Fed began to hike raises questions about whether the labor market is undergoing a soft landing or reacceleration, see the first chart below.
The split between the goods sector and the private service sector shows what looks like a soft landing in the goods sector and a reacceleration in the private service sector, see the second and third charts.
The no landing in services is consistent with ongoing strong demand for airlines, hotels, restaurants, concerts, and sporting events.
With the service sector making up 72% of total employment and generally less sensitive to Fed hikes, and with jobless claims still at very low levels, the upside risks to employment over the coming months are significant.
