10k Words - May 2020

Apparently, Confucius didn’t say “One Picture is Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy. 

We had to give you something on coronavirus - so it is the most complex infographic we've seen, from DannyDorling.org, then its over to US bonds, where yields are so low, Bloomberg highlights they imply some belief that the Federal Reserve will move to negative rates. Citi sets out the unprededented wave of central bank liquidity and the impact on the risk-free rate, making bond rates relatively more attractive. From government bonds we move to high-yield (or junk) where rates have surged and Goldman Sachs forecasts a spike in defaults. What happens in equities when the spread on high yield bonds expands? Verdad Capital shows US small cap value starts to perform and charts the significant valuation spread between the cheapest and most expensive.Citi Research warns that the huge wave of liquidity is flooding into a market already highly indebted. Finally, Macquarie maps out the decline in Australian EPS growth we explored last month.


Charting Coronavirus increase in deaths per day v average
Source: DannyDorling.org


Treasury Yields Hit a New Low in US


Source: Bloomberg


Global central bank purchases driving improved yields relative to the risk-free rate

Source: Citi Research


High-yield bonds default rate

Source: Goldman Sachs, AFR



Returns on US small-value stocks are higher when high-yield spreads blow-out

Source: Verdad Capital


Valuation spread between cheapest & most expensive decile of US equities (using free cash flow yield)

Source: Verdad Capital


US debt/GDP by sector (%) v. yields (%) 
Source: Citi Research


Australian Market EPS growth profile (%)


Source: Macquarie Research





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