US ISM/capex/econ surprise/jobless claims


The ISM Services data once again giving us reason to believe monetary policy is sufficiently tight. New orders in a bit of a hole. Market (equities) not fussed.

I’ve said a lot previously about how if you set your asset allocation strategy to the PMI’s, you’d have been blown away (in a bad way) by the market these past few years. That seems very clear today, particularly as I note the JPM strategist falling on the sword (they went very bullish in ’22, and very bearish in ’23, which didn’t work out well).

I dug out the “year end price targets” from the start of the year (we published this graph back in December ’23, in our market outlook, note having “run the chart today”, the timestamp is current). He had a PT of 4200 for the S&P500; it’s currently above 5500.

Our view; the macroeconomic cross currents are very difficult to parse, at the moment. Don’t swim to far from the shore, but you also need to be in the water. At the very least, having a few more signal inputs to guide DAA than PMIs.


Non defense ex aircraft is the “core business capex” measure, and within it, new orders is the key one to watch (first row, second column). It’s been pretty flat this past year (it is in nominal terms, so inflation drove a huge amount of it, as did the recovery from the pandemic) in real terms, which is not surprising given interest rates.

Citi Economic Surprise

The economic surprise index data (an index that captures how much economic data matches expectations, basically the miss to consensus estimates) has been quite weak for the US, leading some commentators to assume yields should be much lower. The worse the data relative to consensus, the greater the pressure on yields, for example.

Eyeballing a plot of the 3 month change (daily is too hard for your eyes) tells us there is maybe a relationship. We need a bit more econometrics to make this useful

Putting it into a scatterplot suggests the current 90day change in yields is about what you’d expect, without introducing lags. More negative surprises, and, yields off a bit over the last while.

So no outliers here to do anything with (e.g. changes to make).

Jobless claims

There’s nothing to see here yet. US jobless claims. What lift there is has been off the lowest nadir we could’ve imagined, these past few years. I am sure policy is restrictive, and doing its thing, and other labour data is much cooler, but you can’t run for the hills on this.

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