TRG Fast Facts

By TRG Advisors on July 14, 2023

Weekly data-driven insights on the markets and economy

1. Stubborn Overgrowth

Stocks fell last week amid a familiar theme: Stronger-than-expected economic news raising the odds for higher-for-longer rates. On Thursday, for example, data showed that private employers added 497,000 jobs in May[i] (economists expected 220,000[ii]) and that services activity rose to 53.9 in June from 50.3 in May.[iii] The S&P 500 lost -1.11% during the week but has gained a robust 15.59% year-to-date (ytd).[iv]

2. Weaker Bonds

After being up by as much as 4.15% in May, the ytd return of the broad U.S. bond market has fallen to only 0.77%[v] as persistently strong economic data drives yields higher. Five- and 10-year Treasury yields, for example, have risen 1.08% and 0.78% from their spring lows to 4.37% and 4.08%, respectively. [vi]  

3. On Cloud Nine

Based on bottom-up stock price targets, analysts in aggregate predict that the S&P 500’s price will rise 9.3% over the next 12 months, with the largest gains in energy (23.0%) and health care (15.6%).[vii] But how much stock (pun intended) should we put in that forecast? Probably not much. Vanguard found that in nine of the 12 years between 2011 and 2022, the S&P’s actual return fell outside of analysts’ wide range of estimates.[viii]

4. Mineral Flexing

China announced that it will restrict exports of gallium and germanium ― minerals used to produce semiconductors, missile systems and solar cells.[ix] Beyond these two minerals, its move was a reminder of China’s upper hand: The production of critical minerals is highly concentrated geographically. China supplies 60% of rare earth elements (REEs), and refines 90% of REEs and 60–70% of lithium and cobalt.[x]

5. Downwardly Mobile

This spring, mobile phone traffic in San Francisco remained only 29% of its pre-pandemic level. Toronto’s (44%), Chicago’s (56%) and New York’s (71%) also remained significantly lighter. Traffic in Salt Lake City, on the other hand, was 139% heavier.[xi]

6. Home Cooking

The National Restaurant Association’s Performance Index (RPI), which tracks the health of the U.S. restaurant industry, fell -1.3% in May, representing the first time since January 2021 that the index fell below 100, which indicates contraction.[xii] As of April, food services and drinking place sales had risen about 9% y/y, falling from a 2023 peak of 23% y/y growth in January.[xiii]

7. Sour Pickles

UBS analysts have pinpointed pickleball as a significant driver of increasing nonurgent surgeries undergone by seniors enrolled in Medicare. They estimate that injuries from the game will cost Americans between $250 million and $500 million this year. Seniors, nearly half of whom make more than $100,000 a year, comprise about one third of the 22.3 million people expected to play pickleball this year.[xiv]

8. Threadcrumbs

Facebook’s parent Meta has attracted more than 100 million users to its new social media app, Threads, since its launch on July 5.[xv] That is nearly 20% of the 535 million monetizable users Twitter, which launched more than 15 years ago, reports having.[xvi] Meta has roughly 3.8 billion existing users and had $116 billion in revenue versus Twitter’s $5.1 billion in 2021, when Twitter was still a public company.[xvii] 

9. Leaving Work Early

During the COVID-19 pandemic, the U.S. labor force participation rate (LFPR) fell 3.2% from 63.3% in February 2020 to 60.1% in April 2020, the largest drop on record. After quickly rebounding, it remained 1% lower as of year-end 2022. While many variables contributed to this trend, researchers estimate that there were approximately 2.4 million excess retirees (individuals who wouldn’t have otherwise retired) as of April 2023 ― a significant contributor to the LFPR drop.[xviii]   

10. An Emotional Roller Coaster

Eight roller coaster riders in Wisconsin were stuck upside down for several hours after the ride malfunctioned in midair. The passengers hung in the balance as trucks with large enough ladders were called in from neighboring towns and an off-duty firefighter advised local crews.[xix] About 0.9 injuries result per million amusement park rides at approximately 400 fixed-site parks in North America.[xx]

[i] ADP® National Employment Report, June 2023, https://adpemploymentreport.com/. Accessed July 11, 2023.

[ii] Grant, Charley, “Why the ADP Jobs Report Is Rattling Markets,” The Wall Street Journal, July 6, 2023.

[iii] Zeiger, Dan, “Report On Business® Roundup: June Services PMI®,” Institute for Supply Management, July 6, 2023, https://www.ismworld.org/supply-management-news-and-reports/news-publications/inside-supply-management-magazine/blog/2023/2023-07/report-on-business-roundup-june-2023-services-pmi/. Accessed July 11, 2023.

[iv] FactSet total returns as of July 7, 2023.

[v] As measured by the Barclays U.S. Aggregate Bond Index, FactSet total returns as of July 7, 2023.

[vi] Board of Governors of the Federal Reserve System (US), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity and 5-Year Constant Maturity, Quoted on an Investment Basis [DGS10], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/DGS10 and https://fred.stlouisfed.org/series/DGS5. Accessed July 11, 2023.

[vii] Butters, John, “Industry Analysts Project 9% Increase in S&P 500 Prove Over the Next 12 Months,” FactSet, July 7, 2023, https://insight.factset.com/industry-analysts-project-9-increase-in-sp-500-price-over-the-next-12-months. Accessed July 11, 2023.

[viii] DiCiurcio, Kevin, “In Market-Forecasting, Longer Horizons Help,” Vanguard, January 24, 2023, https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/market-forecasting-longer-horizons.html. Accessed July 11, 2023.

[ix] Emont, Jon, “China Controls Minerals That Run the World—and It Just Fired a Warning Shot at U.S.,” The Wall Street Journal, July 7, 2021.

[x] International Energy Administration, “Clean Energy Supply Chains Vulnerabilities,” Energy Technology Perspectives 2023, https://www.iea.org/reports/energy-technology-perspectives-2023/clean-energy-supply-chains-vulnerabilities. Accessed July 11, 2023.

[xi] University of Toronto School of Cities, based on the 11-week rolling average as of April 10, 2023, https://downtownrecovery.com/dashboards/recovery_pattern_raw.html. Accessed July 11, 2023.

[xii] National Restaurant Association, “Restaurant Performance Index fell 1.3% in May,” https://restaurant.org/research-and-media/research/economists-notebook/restaurant-performance-index/. Accessed July 11, 2023.

[xiii] U.S. Census Bureau, Retail Sales: Food Services and Drinking Places [MRTSSM722USS], retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/MRTSSM722USS. Accessed July 11, 2023.

[xiv] Bohannon, Molly, “Pickleball Injuries Cost Americans Nearly $400 Million This Year—And Seniors Are Hit The Hardest,” Forbes, https://www.forbes.com/sites/mollybohannon/2023/06/26/pickleball-injuries-cost-americans-nearly-400-million-this-year—and-seniors-are-hit-hardest/. Accessed July 11, 2023.

[xv] Capoot, Ashley, “Twitter Traffic is ‘Tanking’ as Meta’s Threads Hits 100 Million Users,” CNBC, July 10, 2023, https://www.cnbc.com/2023/07/10/twitter-traffic-is-nosediving-as-metas-threads-hits-100-million-users.html. Accessed July 11, 2023.

[xvi] Needleman, Sarah E., “The Rapid Rise of Threads Appears to Be Hurting Twitter,” The Wall Street Journal, July 10, 2023.

[xvii] The Economist, “Social Media Smackdown,” July 8, 2023.

[xviii] Faria e Castro, Miguel and Samuel Jordan-Wood, “Excess Retirements Continue despite Ebbing COVID-19 Pandemic,” June 22, 2023, https://www.stlouisfed.org/on-the-economy/2023/jun/excess-retirements-covid19-pandemic. Accessed July 11, 2023.

[xix] Olson, Emily, “Roller Coaster Riders Were Trapped Upside Down for Hours after Mechanical Failure,” NPR, July 5, 2023, https://www.npr.org/2023/07/05/1186003765/roller-coaster-upside-down-wisconsin-fireball. Accessed July 11, 2023.

[xx] Neuman, Scott, “Here’s What To Know About Roller Coaster Safety After 2 Recent Scares,” NPR, July 6, 2023, https://www.npr.org/2023/07/06/1186026307/roller-coaster-safety-carowinds. Accessed July 11, 2023.