WSJ’s Daily Shot: The Most Important Financial Charts Of 2016 – Part Two

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The Daily Shot: 30-Dec-16

Equity Markets

Emerging Markets

The Eurozone

The United Kingdom



Energy Markets




Asset Management

Funding Markets

Food for Thought

Welcome to the special edition of the Daily Shot: Charts of the Year – Part II.


Equity Markets

1. In August, shorting volatility became a popular carry trade, albeit a dangerous one.


2. 2016 was all about buying the dips, with recoveries after each “crisis” becoming shorter.

Source: BofAML, @NickatFP, @joshdigga


3. Pharmaceuticals and biotech were the worst performing sector in 2016 – a trend that started after Hillary Clinton began pushing for price controls.



4. Oil was a major driver of global stock prices, especially in the first half of 2016.

Source: @Schuldensuehner


4. Here are several thematic market moves that stood out in 2016.

The Wells Fargo scandal:


Banks rally on Trump victory as the Republicans are expected to ease financial regulation. Higher interest rates also helped. Here are the shares of Goldman Sachs.


Gun manufacturers tanked. Demand is expected to decline on easier firearms regulations with Republicans in control.


Booz Allen got hammered as another company employee (after Edward Snowden) was arrested for stealing sensitive information from the NSA.


Defense contractors took a hit after Trump went after the F-35 program (it wasn’t just Lockheed Martin).


Exxon rallied on the Rex Tillerson nomination.


Investor euphoria permeated the US equity markets on hopes for less regulation, corporate tax cuts, dividend tax cuts, better treatment of capital investments, fiscal stimulus, and improved consumer sentiment. VIX dipped below 11 before recovering somewhat.


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Emerging Markets

1. Latin America

Argentina’s economy continued to struggle in 2016 as the recession worsened.


Brazil’s bond yields hit multi-year lows because inflation declined faster than expected and the central bank is expected to keep cutting rates. Real (inflation-adjusted) rates remain elevated.


The Mexican central bank is hiking rates to stabilize the peso which hit record lows in 2016.



Mexican bonds took a hit, and CDS spreads widened after Trump’s election victory.



Venezuela’s currency completely collapsed. In a move resembling the Weimar Republic, investors bought up stocks to prevent their savings from melting away.



2. Europe

Russia’s consumer remains in pain as disposable incomes declined by most since 2008.


Nonetheless, the Russian stock market hit new records on Trump’s victory and investors loaded up on long-ruble bets in response to higher oil prices.



Latvia’s CDS spreads widened after the US elections on fears that friendly relations with Russia could put the Baltic nations at risk.


The failed Turkish coup d’etat attempt and the deteriorating security situation in the country sent the GDP into contraction.


Tourism collapsed, bond yields rose to multi-year highs, and the Turkish lira hit record lows.




3. Africa and the Middle East

Egypt allowed the currency to float which resulted in a nearly 60% devaluation against the dollar in 2016.


Just like the situation in Venezuela, the Egyptian stock market hit record highs.


Early in the year, the Saudi financial system faced a liquidity crunch as the government revenue collapsed. The interbank rates rose sharply, and the sovereign CDS spreads widened. The Saudi’s massive bond issue later in the year resolved the liquidity problem.

Source: @Schuldensuehner




South Africa’s markets went into a tailspin on rumors of the nation’s finance minister, Pravin Gordhan, getting arrested. This event demonstrates an ongoing power struggle as the ANC comes under pressure.


Mozambique’s government defaulted after the WSJ uncovered early in the year that the nation’s state-owned companies quietly and illegally borrowed massive amounts of money.


4. Asia

Here is the Thai baht after the news that the nation’s king was very ill.


India’s bond yields fell to new lows after the government banned 500 and 1000-rupee notes. Banks (especially state banks), flush with deposits, went on a buying spree.


Rodrigo Duterte’s rhetoric has not been helpful for the Philippine stock market.


5. General trends

Flows into emerging market bonds accelerated in the second quarter.


Here is the performance of EM equity markets after Trump’s victory.


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The Eurozone

1. Early in the year and several times throughout 2016, Deutsche Bank (DB) became the markets’ punching bag.

Here is the DB CDS spread in February.

Source: @AlasdairPal


DB’s contingent convertible debt (CoCo) in February.

Source: @Schuldensuehner, @FT


German sovereign CDS spread widened as investors worried about the costs of a potential Deutsche Bank (and even Commerzbank bailout).

Source: @Btabrum


DB’s share price in July.


2. Another troubled Eurozone bank Monte dei Paschi attempted a private recapitalization deal but failed to get there. The Italian government is now expected to step in with a bailout. Share price collapsed and subordinated debt went into a tailspin.



3. Greek bond yields dropped in November on the news that debt relief may be in the works.


However, when the government announced a pension “bonus” the Eurozone put debt relief on hold (in December).


4. Portugal had a close call in 2016, staring at a possible downgrade to a junk rating. DBRS, the last remaining rating agency that has the nation’s debt in an investment-grade bucket ultimately decided to leave the rating unchanged. A junk rating by all rating agencies would disqualify Portugal’s debt from the ECB’s QE purchases.


5. The Italy-Germany bond spread rose before the Italian referendum.


6. The France-Germany bond spread rose as investors worry about the French elections outcome next year.


7. 2016 saw European bond yields hit record lows. On the short end of the curve, yields continue to fall in response to the ECB’s more flexible bond buying program.


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The United Kingdom

1. Some polls apparently were successful in predicting Brexit.

Source: @FT


2. The day after the EU Referendum vote many in the UK were trying to figure out what it means to be part of the EU and how does one get an Irish passport.

Source: Deutsche Bank



3. The pound saw a record decline after the vote, followed by the GBP “flash crash” in October.


4. The data showed a strong relationship between education levels and the vote.

Source: Goldman Sachs


5. UK bonds saw an unprecedented rally as yields collapsed.


6. On the other hand, the pound weakness sent inflation expectations to multi-year highs.


7. Several property funds halted redemptions and revalued their NAVs sharply lower.


8. The economy, however, continues to surprise to the upside as the unemployment rate hits a multi-decade low.


9. For the first time, the short end of the gilt curve went into negative territory.


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1. Elsewhere in Europe, the Swiss monetary base hit another record (now approaching the size of the country’s GDP). The SNB keeps buying euros to keep the Swiss franc from rising too much.


2. Czech short-term yields shot deep into negative territory as the country prepares to lift the cap on the nation’s currency. The koruna is expected to jump against the euro, causing a Swiss-style deflation in the Czech Republic.


3. The Swedish krona saw dramatic declines vs. the euro as Riksbank pushed its ultra-accommodative policy.


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1. Dollar-yen fell below par in August as the BoJ looked helpless and refused to increase stimulus. But as US rates rose, so did dollar-yen.


2. Japan’s consumer spending never recovered from the consumption tax hike in 2014.


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Energy Markets

1. 2016 started with multi-year lows for crude oil. In a pattern of short rallies, followed by bigger declines, WTI crude approached $25/bbl in February. Oil & gas investment collapsed.


Source: Barclays, ‏@joshdigga


2. In February, US gasoline futures fell below $1/gallon as inventories spiked.



3. Both Russia and the OPEC boosted oil production right before the output cuts agreement.



Back to Index



1. 2016 saw some spectacular commodity price movements. The year started with rising pork prices in China which drove soybean meal (which is used in animal feed) futures to multi-year highs.


2. US hog prices also rose in response but ended up collapsing later, with the commodity becoming another China-driven bubble to burst. Some have referred to this trend as “bacon deflation.”


3. Hedge funds jumped into the sugar markets on bets that El Nino will damage crops. That bubble too ended up bursting later in the year.


4. Orange juice was one of the best performars as “citrus greening” devastated Florida crops. Brazilian crops were also worse than expected.


5. With all the geopolitical uncertainty out there, speculative funds placed massive long bets on precious metals.


But with US rates on the rise, that position didn’t work out very well.


6. Wheat was a big loser for the year as global crops hit records. A much stronger US dollar didn’t help. This trend delays the recovery in the US agricultural sector.


7. Asian coal prices saw an unprecedented rally as China worked to reduce domestic coal production overcapacity.


8. Coal business in the US collapsed as cheap natural gas became the largest source of electricity production. The chart below shows coal railcar loadings in June.

Source: Yardeni Research


9. In the early part of the year, global shipping costs fell to new lows as shown by this log chart of the Baltic Dry Index.


10. After Trump’s victory, speculative accounts moved from silver and gold into copper. The commodity looks like a crowded trade now.


Back to Index



1. The massive drop in commodity prices in 2015 and the early part of 2016 generated record defaults in the debt of commodity-focused companies.


2. Despite the defaults, the reach for yield and a massive equity rally after Trump’s victory send credit spreads to two-year lows.



3. Rising rates pushed many investors into floating-rate products, such as leveraged loans.


4. The expectations of tax cuts in the US made tax-free products less attractive, creating a sharp selloff in the muni market. Funding costs, especially for weaker state and local governments such as Chicago, have risen dramatically.


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Here are some major events in the Bitcoin market in 2016.

1. The Hong Kong-based exchange Bitfinex was hacked, and millions of dollars worth of Bitcoin was stolen in August. Bitcoin tanked by more than 20% in few minutes.


2. China started talking about currency controls on Bitcoin to prevent residents from moving their cash out of the country via the cryptocurrency.


3. By the end of the year Bitcoin hit a 3-year high (now approaching $1,000) as the Chinese and others piled into the market.


Back to Index


Asset Management

Some analysts continue to question the wisdom of investing in hedge funds in this environment. They argue that hedge funds basically represent a high-fee beta play.

Source: Morgan Stanley


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Funding Markets

1. 2016 was a monumental year for US funding markets as the prime money market fund rules went into effect. Most corporate treasurers are not allowed to keep cash in products with fluctuating NAV and therefore were forced out of prime funds. The sector AUM collapsed.


2. Financial commercial paper (CP) outstanding hit lows not seen in decades.


3. The above created a problem for foreign banks who relied on US CP to fund their dollar assets. The cross-currency swap basis blew out, making it expensive for Japanese and European banks to convert their domestic borrowings into hedged USD dollar loans.


4. In the third quarter, TED spread and the LIBOR-OIS spread blew out as foreign banks tried borrowing from US banks to meet their dollar funding needs.



We’ll have more on the topic next week.

Back to Index


Food for Thought

1. Heroin-related deaths in the US.

Source: The Washington Post, @Tmp_Research; >Read full article


2. Cities with the highest rental costs.

Source: @StatistaCharts, Jake


3. Zika cases showed up all over the US in 2016.


4. “Selfie” fatalities.

Source: @StatistaCharts, Jake


5. Rare Pokemon inside.

Source: @sobata416, @niubi


6. The suicide map of the US.

Source: @EconBizFin, Jake


7. The betting markets correctly predicted Trump’s nomination but not the general election victory. This is from January.

Source: Predictit


8. The planet is getting warmer.

Source: @MattGarrett3; >Read full article


9. US e-commerce market share is still below 10% but gaining ground.


10. Political polarization in the US.

Source: @pewresearch


Back to Index

This is source I found from another site, main source you can find in last paragraph

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