Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

Since the release of US labour market data yields have slipped. Notable price action has unfolded for only the third time since yields peaked in late March, which indicates lower yields still.Additionally, USDJPY has faltered, which is consistent with the signs in fixed income markets.But how low is low? Could this just be a short lived and relatively meaningless move down in yields or could we see US 10Y yield below 1.46% and US 30Y yield below 2.15%?

Since the release of US labour market data yields have slipped. Notable price action has unfolded for only the third time since yields peaked in late March, which indicates lower yields still.Additionally, USDJPY has faltered, which is consistent with the signs in fixed income markets.But how low is low? Could this just be a short lived and relatively meaningless move down in yields or could we see US 10Y yield below 1.46% and US 30Y yield below 2.15%?

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Macroeconomics

<ul>
<li>While our US employment sentiment indicator continued to improve in April along with robust job openings, our text analytics now see a +2.5x STDEV increase in reports of labor shortages and companies struggling to hire new employees</li>
<li>Excluding reports of frontline worker shortages in March 2020, the last time we saw reports of labor shortages trending at this magnitude was May 2018</li>
<li>On an absolute basis, the number of media reports of labor shortages is back to the higher end of 2018-2019 ranges</li>
<li>In 2018-19, our data saw 3 incidences of &gt;2x STDEV increases in reports of labor shortages; in all cases, these preceded slower payroll growth in subsequent months</li>
<li>In the current episode, media reports focus primarily on labor shortages in the leisure &amp; hospitality sector whereas the previous episode was characterized by skilled labor shortages; nonetheless, Q1 earnings calls highlight widespread labor shortages across most sectors</li>
<li>Even as labor shortages affect nearly all industries, the single largest needle-mover for absolute payroll figures remains leisure and hospitality, which in March comprised 42% of the negative delta in total private payrolls relative to year-ago levels at -2.35M jobs or nearly -15% Y/Y; no other sector comes close in terms of COVID job losses or recovery potential in payroll terms</li>
<li>Given the heavy weighting of leisure and hospitality in private payroll growth at this time, the sector's significant hiring needs suggest that any slowdown in hiring would be followed by wage increases to incentivize unskilled labor to return to the workforce; labor shortages are likely to remain a key feature of the post-COVID recovery, but higher wage elasticity in leisure &amp; hospitality suggest these frictions may be resolved sooner in this key sector with a broadly inflationary outcome</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


While our US employment sentiment indicator continued to improve in April along with robust job openings, our text analytics now see a +2.5x STDEV increase in reports of labor shortages and companies struggling to hire new employees
Excluding reports of frontline worker shortages in March 2020, the last time we saw reports of labor shortages trending at this magnitude was May 2018
On an absolute basis, the number of media reports of labor shortages is back to the higher end of 2018-2019 ranges
In 2018-19, our data saw 3 incidences of &gt;2x STDEV increases in reports of labor shortages; in all cases, these preceded slower payroll growth in subsequent months
In the current episode, media reports focus primarily on labor shortages in the leisure &amp; hospitality sector whereas the previous episode was characterized by skilled labor shortages; nonetheless, Q1 earnings calls highlight widespread labor shortages across most sectors
Even as labor shortages affect nearly all industries, the single largest needle-mover for absolute payroll figures remains leisure and hospitality, which in March comprised 42% of the negative delta in total private payrolls relative to year-ago levels at -2.35M jobs or nearly -15% Y/Y; no other sector comes close in terms of COVID job losses or recovery potential in payroll terms
Given the heavy weighting of leisure and hospitality in private payroll growth at this time, the sector's significant hiring needs suggest that any slowdown in hiring would be followed by wage increases to incentivize unskilled labor to return to the workforce; labor shortages are likely to remain a key feature of the post-COVID recovery, but higher wage elasticity in leisure &amp; hospitality suggest these frictions may be resolved sooner in this key sector with a broadly inflationary outcome
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshots:  Is a Tight Labor Market Already Slowing Payrolls Growth?

The price or yield action on US 10 year Treasury is now beginning to reveal a loss of momentum and indicate at least a consolidation if not lower yields in the short term.A move below 1.58% would be particularly telling.What this, and the developing price action on Oil, tells us about equities is up for interpretation – though from our stand point the bias is to remain cautious on equities as we settle into the new month and quarter.

The price or yield action on US 10 year Treasury is now beginning to reveal a loss of momentum and indicate at least a consolidation if not lower yields in the short term.A move below 1.58% would be particularly telling.What this, and the developing price action on Oil, tells us about equities is up for interpretation – though from our stand point the bias is to remain cautious on equities as we settle into the new month and quarter.

The past few weeks have raised many questions about what is driving what. As yields have risen aggressively due to higher inflation expectations, there have been some concerns about the potential knock-on impact on financial markets generally, including some corners of the stock markets and emerging markets. However recent developments in Oil and stocks suggest we may go back to a more basic relationship between the different financial markets and that Bonds may even outperforming in the short term.

The past few weeks have raised many questions about what is driving what. As yields have risen aggressively due to higher inflation expectations, there have been some concerns about the potential knock-on impact on financial markets generally, including some corners of the stock markets and emerging markets. However recent developments in Oil and stocks suggest we may go back to a more basic relationship between the different financial markets and that Bonds may even outperforming in the short term.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

US Breakeven 10 Year / Technical Analysis

US 10yr yield is showing a more impulsive rise that will shape the trend component if we stay above 1.50% (met earlier than expected). Pullback support lies at trendline near the 1.25% area and rises with time translation.The weekly chart shows how important the 1.50% barrier is to clear of fade back below, represented by key low supports in 2012, 2016 and 2019 that now will act as the breakout pivot or failure resistance.1.50% breakout would impact performance in the banks, gold and USD near term bounce prospects.

US 10yr yield is showing a more impulsive rise that will shape the trend component if we stay above 1.50% (met earlier than expected). Pullback support lies at trendline near the 1.25% area and rises with time translation.The weekly chart shows how important the 1.50% barrier is to clear of fade back below, represented by key low supports in 2012, 2016 and 2019 that now will act as the breakout pivot or failure resistance.1.50% breakout would impact performance in the banks, gold and USD near term bounce prospects.

US 10yr Yield Pressing on Breakout Resistance

US Breakeven 10 Year (USGGBE10 INDEX)

Bonds & Commodities: A Picture Unfolding

The price action in Bonds and the emerging picture in major commodity markets all point towards lower yields. Breaks are yet to be confirmed though...

Shyam Devani

TMI Snapshots: Is a Tight Labor Market Already Slowing Payrolls Growth?

While our US employment sentiment indicators continued to improve in April, an outlier +2.5x increase in reports of labor shortages may temporarily...

Elan Gore

US 10 Year Yield – What to Watch

A more cautionary short term picture is beginning to unfold indicating lower US 10 year yield which raises questions for other markets including US...

Shyam Devani

Oil, Stocks, Bonds - Back to Basics

The recent weakness in Oil coupled with the bearish indication in equities may create a near term bid for Bonds as a more 'traditional'...

Shyam Devani

US 10yr Yield Pressing on Breakout Resistance

US 10yr yield is showing a more impulsive rise that will shape the trend component if we stay above 1.50%. Pullback support lies at trendline near...

Thomas Schroeder