Diary of a Financier

Top Newsstuffs (September 26 – October 2)

In Bookshelf on Sun 2 Oct 2016 at 05:52

Top reads from across this week…

Macro

Consumer confidence survey (September 2016)
by Conference Board

Sentiment spikes significantly again, crushing expectations again, while reaching a postcrisis high, all in spite of a material upward revision to the prior month; all components were strong, suggesting a decent tailwind for coming months; surge led by low-income respondents…consumer-confidence-vs-gdp-2016-09
Consumer confidence index: +2.3 mom @ 104.1 (beats 99.0e); a postcrisis high; 70th percentile of historical data
[Previously: Retail sales bullish & A new generation of Depression Babies?]
#Bullish! $XLY

Personal income & outlays (August 2016)
by The Bureau of Labor Statistics (BLS)

Although income & spending decelerated a bit, they maintain healthy trends after last month’s huge spike; downward revisions to prior month data were de minimis; the headline report was mixed, beating expectations for DPI & missing for PCE…Real DPI vs PCE (2016.07)
Disposable personal income (Real DPI): -0.3pp @ +2.4% yoy, +0.1% mom
Personal consumption expenditures (Real PCE): -0.4pp @ +2.6% yoy, -0.1% mom
Personal savings rate: +0.4pp @ +5.7%
[Previously: Retail sales remain bullish & A new generation of Depression Babies?]
#Bullish $XLY #Wages

Manufacturers’ durable & capital goods (August 2016)
by US Department of Commerce

Uninspiring report finishes a tough summer for durable goods; results beat expectations, with little help from slight downward revisions to prior month data; yoy comps stemmed their decline in a tough seasonal month; capex continues to struggle due to mining/energy bust; on the bright side, the much-needed drawdown in inventories continues…
Core durable goods (ex-transportation)core-durable-goods-capex-change-yoy-2016-08
    Orders: +0.3pp @ -1.1% ytd, -0.4% mom (beat -0.5e)
    Shipments: +0.5pp @ -1.7% ytd, unch mom
Core capex (capital goods, ex-defense & aircraft)
    Orders: +0.3pp @ -4.0% ytd, +0.6% mom (beat -0.1e)
    Shipments: +0.1pp @ -5.1% ytd, -0.4% mom (miss +0.1e)
Core inventory (ex-transportation)
    Inventories: +0.8pp @ -2.3% ytd, +0.3% mom
#Bearish #Contraction $XLI

Gross Domestic Product: Third estimate (2016q2)
by Bureau of Economic Analysis (BEA)

The revision beats expectations; although Q2 growth was another major disappointment, it was almost entirely attributable to a collapse in Investment, which itself was almost entirely attributable to another huge Inventory drawdown (-116bps out of Investment’s -134bp detraction fm GDP); so, there should be a decent tailwind from this 5th straight quarter of material Inventory drawdowns (sequentially detracting -52, -57, -36, -41, -116 bps from GDP growth rate)…
Real GDP (Q2): +0.3pp @ +1.4% qoq saar (beat +1.3e)Real GDP components 2016q2.ii
    Inflation: Core +2.1%; Headline +2.3%
    Consumption (PCE): -0.1pp @ +4.3%; up from last quarter’s 2-year low
    Investment: +1.8pp @ -7.9%; Residential -7.7%; Nonresidential +1.0%, dragged down by energy
    Government spending: -0.2pp @ -1.7%; Federal -0.4%; State & local -2.5%
    Exports: +0.6pp @ +1.8%
    Imports: -0.1pp @ +0.2%
    Inventories: +10bp @ -1.16pp detraction fm GDP growth rate
Real GDP per capita (Q2): +0.43% yoy; -10.3% below LT regression trend
Real GDP (2016q1): -0.3pp @ +0.8% qoq saar
Real GDP (2015FY): +0.2pp @ +2.6% yoy
Real GDP (2014FY): unch @ +2.4% yoy
Real GDP (2013FY): +0.2pp @ +1.7% yoy
#Neutral

Sentiment

Retail investor sentiment survey (2016.09.29)
by The American Association of Individual Investors (AAII)

Sentiment keeps sliding, strengthening an already extreme bullish signal; there’s no better manifestation of investors’ postcrisis PTSD; data collected before the Fed’s decision to defer rate hikes this week…
Bull/Bear ratio: unch wow @ 0.65 (below both 1.30 historical average & 1.00 – 1.80 extremes)retail-sentiment-bulls-vs-bears-2016-09-29
Bullish: -0.8pp @ 24.0% (below 39 avg & 30 – 45 extremes); closer to Brexit lows
Bearish: -1.2pp @ 37.1% (above 30 avg & between 25 – 40 extremes); highest since the correction 2/2016
Neutral: +2.0pp @ 38.9% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 3/2017).
[Previously: Institutional allocations remain a bullish signal & Retail allocations remain neutral]
#Bullish! #Contrarian

Technicals

Update: Stock market seasonality (S&P 500, 2016q4)
by Bank of America Merrill Lynch (BAML) & MKM Partners

As we enter October, SPX is leaving behind what’s historically its worst month (September) & the summer swoon (sell in May),SPX seasonality entering a stretch of seasonally strong performance into year end, which rolling 3-month period is not only its best for total return (Q4 @ +2.4% historical average total return), but also its highest for winning percentage.
The best rolling 6-month period starts in November (+5.11% TR, 70.93% winning percentage).
#Bullish $SPX $SPY

–Romeo

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