Macrosynthesis

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Inflation Nation

In March, a key inflation indicator - the Producer Price Index (PPI) - fell to 2.7%, marking a significant decrease from the previous month and landing below economists' expectations of 3.0%. The drop of 220 basis points from February's revised 4.9% rate is the largest monthly decline since inflation reached its peak in 2022.

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The core PPI inflation, which excludes volatile food and energy components, remained in line with expectations, coming in at 3.4%. This signals a more stable underlying inflation trend to consider.

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Notably, since reaching a high of 11.3% in June 2022, the overall PPI inflation rate has consistently declined to the current 2.7% rate within less than a year. In addition, there has not been a single monthly increase in PPI inflation since that peak in June 2022.

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Remember when it was taking 6 months to get anything large delivered?

Well, the cost to ship goods by ocean freighter just hit pre-COVID levels (as shown above).

San Francisco's Office Vacancy Crisis

As the city of San Francisco contends with an escalating office vacancy problem, commercial real estate investors are becoming increasingly wary of the long-term effects on the market. The office vacancy rate has now soared to an all-time high of 29.5%, a staggering sevenfold increase since the beginning of 2020. This rapid upsurge has surpassed the previous peak of less than 20% experienced after the Dot-com bubble burst.

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Given the current trajectory, analysts predict that the vacancy rate will continue to climb, potentially exceeding 35% within the next year. This bleak outlook is likely to have significant implications for intermediate investors and stakeholders in the commercial real estate sector.

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In an effort to mitigate the financial burden of unused office spaces, companies have been actively attempting to sublease their properties. As of now, 7.2% of the total office inventory in San Francisco is available for sublease, up from just 2.8% in 2019. This trend is indicative of the broader challenges facing businesses and investors alike as they navigate the post-pandemic landscape.

China and India Boost Russian Crude Oil Exports, Igniting Market Concerns

China and India's increased purchases of Russian crude oil have pushed the country's export levels higher than pre-war figures, driving the ruble-based MOEX Russia index to a one-year high. However, this development has raised concerns about oil cargoes surpassing the EU and G7's $60/barrel price cap.

WTI Crude Futures Hold Steady as Market Dynamics Shift

Crude futures were trading at approximately $82 a barrel on Friday, maintaining a five-month high. The commodity is on track for a 1.6% weekly gain, marking the fourth consecutive week of increases. This uptick can be attributed to tight global oil supplies and a weaker US dollar.

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In a surprising move earlier this month, OPEC+ announced an output cut of 1.16 million barrels per day from May until the end of 2023. Despite this cut, the cartel cautioned that seasonal demand from the US might be adversely affected by a weakening economy, resulting from high-interest rates and the impact of China's reopening.

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In its April Oil Market Report, the IEA projected that world oil demand would rise by 2 million bpd in 2023, reaching a record 101.9 million bpd. Concurrently, additional cuts by OPEC+ are expected to reduce the global oil supply by 400,000 bpd by the end of 2023. This combination of factors is likely to exacerbate an anticipated oil supply deficit in the latter half of the year, which investors should closely monitor.

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We discuss how we're playing this in the Level 2 Newsletter.

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Last Week's Top Events

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Noteworthy Events

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This Weeks Recap

On Friday, the Dow Jones Industrial Average closed down 140 points, while the S&P 500 and Nasdaq 100 dipped 0.2% and 0.3%, respectively. A combination of earnings results and fresh economic data provided the Federal Reserve with further justification to maintain its course of interest rate hikes.

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In a surprising development, the University of Michigan's Consumer Sentiment Index rose to 63.5 in April 2023, marking an unanticipated uptick in consumer confidence. Concurrently, the inflation outlook for the upcoming year reached a five-month high of 4.6%, potentially adding to the Fed's concerns over inflationary pressures.

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In earnings news, major financial institutions such as JPMorgan Chase, Wells Fargo, and Citigroup reported better-than-expected earnings and revenue, spurring a rally in banking stocks. The strong performance of these banks comes despite recent turbulence in the financial sector.

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BlackRock, the world's largest asset manager, also reported swelling assets under management, while deposits at JPMorgan Chase saw an unexpected increase as investors shifted funds in the wake of several banks collapses.

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However, U.S. retail sales for March took a hit, declining more than anticipated, primarily due to falling gas prices. On a brighter note, the Dow Jones Industrial Average managed to rise 1.4% over the week, while both the S&P 500 and Nasdaq 100 climbed by 1.5% each.

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One retailer - Best Buy - announced layoffs last week in response to waning consumer demand.

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Another, Amazon, announced a diversification to its portfolio of offerings: a new cloud service for generative AI that competes with ChatGPT.

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CASE STUDY: GRIL Stock Buyback +7.87%

In a recent announcement, GRIL, an innovative player in the global agricultural-commodity supply chain and burgeoning restaurant business, has revealed that its Board of Directors has given the green light for a share repurchase program. With immediate effect, the company plans to buy back up to $2 million worth of its outstanding common stock.

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LevelFields users were alerted to the Stock Buyback announcement on Thursday morning, which resulted in a +7.87 1D return in the GRIL share price.

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The company has a trajectory to add another $3.6M to their bottom line by the end of 2023, and $600M to their top line revenue based on a recently launched joint partnership to sell food commodities.

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The Stock Buyback scenario, on average, has a +2.62% 1D return. Turn on alerts for the scenario and avoid missing out.

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Upcoming Catalysts:

Notable Earnings

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Monday

• Charles Schwab (SCHW)
• Equity Lifestyle Properties (ELS)
• State Street (STT)
• M&T Bank (MTB)
  

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Tuesday

• Netflix (NFLX, $346.19) is set to announce its first-quarter earnings after the market closes on Tuesday. The streaming giant's stock enjoyed a robust Q1 performance, rallying over 17%, as market participants favored riskier assets at the beginning of 2023.

• Bank of America (BAC)
• First Horizon (FHN)
• Goldman Sachs (GS)
• Intuitive Surgical (ISRG)
• Lockheed Martin (LMT)
  
  

Wednesday

• Tesla (TSLA)
• Abbot Labs (ABT)
• Discover Financial Services (DFS)
  
  

Thursday

• American Express
• AT&T (T)
• AutoNation (AN)

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Friday

• Proctor & Gamble (PG)
• HCA (HCA)

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Economic Reports  

Thursday

• US Jobless Claims
• Existing Home Sales

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Level 2 Trade Updates:

• Last week we sent notice that we closed out short term positions in PGTI and bought back puts sold on AMZN for 9% and 50% gains, respectively.
• We also alerted members to 3 new trade setups with expected returns of 20%, 30% and 200%, respectively, within the next 6-9 months.
• If you're interested in upgrading, you can use promo code: 10level2  for 10% off this week.

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This is not financial advice. All information represent opinions only for informational purposes.

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The LevelFields Team