Diary of a Financier

Top Newsstuffs (June 13-19)

In Bookshelf on Sun 19 Jun 2016 at 05:31

Top reads from the week that was…

Macro

Retail sales (May 2016) | US Government Census
Another awesome report beats headline expectations, redoubled by more upward revisions to prior month data; continues the leadership from US consumers; headline data is starting to lap energy prices’ dead-weight too…Retail sales (%change yoy & $gross, 2016.05)
Core (ex-autos): -0.3pp @ +2.7% yoy, +0.4% mom (meet +0.4e); prior months revised higher
    Gas: -6.2pp @ -9.4% yoy, +2.2% mom
Core core (ex-gas & autos): -0.5pp @ +3.6% yoy, +0.3% mom (meet +0.3e)
Headline: -0.5pp @ +2.5% yoy, +0.5% mom (beat +0.3e); prior months revised higher
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: PCE remains neutral & Consumption boom or depression babies?]
#Bullish $XLY

Housing permits, starts & completions (May 2016) | US Government Census
Good report exceeds expectations, despite slight upward revisions to prior months; maintains a strong trend in this prevailing bastion of pent-up demand…Housing starts 2016.05
Monthly housing starts:  +11.2pp @ +9.5% yoy, -0.3% mom @ 1.164M saar (beat 1.160M exp); prior months revised higher
Growth rate:  unch @ +10.2% ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17, but Expect home sales to soften in 2016 due to low inventories]
#Bullish $XHB $ITB

Inflation: Consumer Price Index (May 2016) | Bureau of Labor Statistics (BLS)
Core inflation accelerates a bit, but maintains acceptable levels near the Fed’s 2% target; headline’s recovery pauses, as it’s still recovering from energy’s drag…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.05
Core CPI (ex food & energy): +0.1pp @ +2.2% ttm, +0.2% mom (meet +0.2e)
Headline CPI: -0.1pp @ +1.0% ttm, +0.2% mom (miss +0.3e)
    Energy: -1.2pp @ -10.1% ttm, +1.2% mom
    Healthcare: +3.5% ttm, +0.5% mom
#Neutral

Sentiment

Retail investor sentiment survey (2016.06.16) | American Association of Individual Investors (AAII)
Sentiment plunges into an extremely bullish signal amidst Brexit fears; the neutral cohort remains excessive relative to its historical average…Retail investor sentiment survey- bulls & bears 2016.06.16
Bull/Bear ratio: -36bp wow @ 0.68 (below 1.30 historical average & 1.00 – 1.80 extremes)
Bullish: -2.5pp @ 25.3% (between 39 avg & 30 – 45 extremes), up from a 11-year low
Bearish: +9.7pp @ 37.5% (between 30 avg & 25 – 40 extremes)
Neutral: -7.2pp @ 37.2% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2016).
[Previously: Retail allocations are neutral & Strategist sentiment still a buy signal]
#Bullish! #Contrarian

Global fund manager allocation survey (June 2016) | Bank of America Merrill Lynch (BAML)
Risk allocations fall to even more extreme lows, maintaining a risk-on buy signal akin to 2011/12’s…
Equity: -5pp @ +1% OW (below +15 & +50 extremes)
Bonds: +7pp @ -34% UW (between -60 & -20 extremes)BAML fund manager allocation survey- equity, fixed income, cash & sectors 2016.06
Cash: +0.2pp @ +5.7% OW (beyond +5.0 extreme high); a new 15-year high
Commodities: +7pp @ -12% UW (between -20 & +12 extremes); a 12-month high
Regions:
    US: +3pp @ -15% UW
    Europe: unch @ +26% OW
    Japan: unch @ -6% UW
    Emerging Markets: +4pp @ +2% UW; a 21-month high
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Bullish! #Contrarian
#Bearish: #Cash $VNQ
#Bullish: $GBP $XLE

–Romeo

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