Just 4% of financial advisors expect a recession this year, down from 85% last year. They also expect more recovery than contraction figures in the data:
Economic Expectations of Financial Advisors, Bank of America Survey
Financial advisors, according to a Bank of America survey, do not have a clear opinion about what stage of the business cycle the economy is at:
Financial advisors' views on the current stage of the business cycle, Bank of America survey
The Chicago CFSEC economic activity index fell from +7 in January to -14 in February, indicating that economic growth was below trend:
Chicago CFSEC Economic Activity Index
The Dallas Fed's headline Texas manufacturing PMI rose to -11.3 in February 2024 from an eight-month low of -27.4 the previous month (consensus -8). The new orders component, a key indicator of demand, rose 18 points to 5.2 in February, the first positive reading since May 2022. The expected future business activity component rose 17 points to 6.2, returning to positive territory after six months of negative readings:
Texas Fed Overall Manufacturing PMI
Just 4% of financial advisors expect a recession this year, down from 85% last year. They also expect more recovery than contraction figures in the data:
Economic Expectations of Financial Advisors, Bank of America Survey
Higher Fed rates over the long term may be less of a problem for tech stocks than commonly thought. The S&P 500 Technology sector has above-average cash flow turnover compared to the rest of the market, but it has relatively little debt and a higher interest coverage ratio:
Q4 2023 Debt to EBITDA and Q4 2023 EBIT to Interest Coverage Ratio by Sector
The copper-to-gold ratio typically declines after the Fed's first rate cut, regardless of whether there is a recession:
Copper, gold prices and their ratios before the first Fed rate cut
Copper, gold prices and their ratios before the first Fed rate cut, which did and did not lead to a recession
The DXY Dollar Index has a close relationship with the Industrial Purchasing Managers Index and outperforms it by approximately 126 trading days. Judging by the movement of the DXY, we can expect a strong upturn in business activity in the coming months:
DXY Dollar Index and ISM Industrial PMI
The cost of put options on risky assets was relatively cheap even a month ago. Today, the cost of put options on major stock indices around the world is at its lowest levels:
The value of put options on major stock indices today versus the value a month ago
Inflows into the tech sector (+$0.7 billion) slowed, while the financial sector (-$0.8 billion) experienced outflows for the 4th week in a row:
Flows into US equities by sector
Flows into US ETFs since early 2024 show outflows from the utilities, energy, FMCG, materials and communications sectors. The largest inflows were observed in the technology, finance and durable goods sectors:
Flows into US ETFs since early 2024 by sector
Positioning in small-cap stocks rises to 26-month high:
Positioning in small cap stocks
Institutional investors
The past 5 weeks have seen large net selling of US equities by hedge funds, with last week's largest short position in individual US equities since September 2023:
Hedge fund flows into US equities
Hedge fund flows into individual stocks indicate a rotation out of the technology, healthcare and industrial sectors. Net sales of technology stocks last week were the largest since July:
Hedge fund flows into US equities by sector
