Diary of a Financier

Top Newsstuffs (October 24-30)

In Bookshelf on Sun 30 Oct 2016 at 05:22

Top reads from across this week…

Macro

Consumer confidence survey (October 2016)
by Conference Board

Sentiment retraced from postcrisis highs after last month’s spike, maintaining a healthy velocity (despite the big sequential drop that everyone’s focusing on)…consumer-confidence-vs-gdp-2016-09
Consumer confidence index: -5.5 mom @ 98.6 (miss 101.0e); down from a postcrisis high; 58th percentile of historical data
[Previously: Retail sales bullish & A new generation of Depression Babies?]
#Bullish $XLY

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

Another uninspired report prolongs manufacturing’s woes; 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- new orders (% change yoy) 2016.09
    Orders: +0.2pp @ -0.9% ytd, +0.2% mom (meet +0.2e)
    Shipments: +0.1pp @ -1.6% ytd, +0.1% mom
Core capex (capital goods, ex-defense & aircraft)
    Orders: +0.1pp @ -3.9% ytd, -1.2% mom (miss +0.2e)
    Shipments: unch @ -5.1% ytd, +0.3% mom
Core inventory (ex-transportation)
    Inventories: +0.5pp @ -1.8% ytd, +0.2% mom
#Bearish #Contraction $XLI

Gross Domestic Product: First estimate (2016q3)
by Bureau of Economic Analysis (BEA)

Healthy acceleration beats expectations, aided by a new tailwind in the re-stocking of Inventories after a string of drawdowns (as expected)…
Real GDP (Q3): +2.9% qoq saar (beat +2.5e)Real GDP 2016q3i
    Inflation: Core +1.5%; Headline +1.9%
    Consumption (PCE): +2.1%
    Investment: +3.1%; Residential -6.2%; Nonresidential +1.2%
    Government spending: +0.5%; Federal +2.5%; State & local -0.7%
    Exports: +10.0%
    Imports: +2.3%
    Inventories: +0.61pp contribution to GDP growth rate
Real GDP per capita (Q3): +2.18% yoy; 10.1% below LT regression trend
Real GDP (2015FY): unch @ +2.6% yoy
Real GDP (2014FY): unch @ +2.4% yoy
Real GDP (2013FY): unch @ +1.7% yoy
#Bullish

Sentiment

Retail investor sentiment survey (2016.10.27)
by The American Association of Individual Investors (AAII)

Sentiment improves ever so slightly, but remains deep within extreme lows indicative of a bullish signal; there’s no better manifestation of investors’ postcrisis PTSD than the massive Neutral cohort…
Bull/Bear ratio: +10bps wow @ 0.73 (below 1.30 historical average & 1.00 – 1.80 extremes)Retail sentiment- bulls vs bears 2016.10.20
Bullish: +1.0pp @ 24.8% (below 39 avg & 30 – 45 extremes); lowest since Brexit panic & 104th lowest alltime reading
Bearish: -3.7pp @ 34.1% (above 30 avg & between 25 – 40 extremes)
Neutral: +2.7pp @ 41.2% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2017).
[Previously: Net speculative futures positioning normalizes after extremes]
#Bullish! #Contrarian

Global fund manager allocation survey (October 2016)
by Bank of America Merrill Lynch (BAML)

Risk allocations remain at extreme lows, maintaining a risk-on buy signal akin to 2011/12’s…
Equity: +10pp @ +11% OW (below +15 & +50 extremes)BAML fund manager allocation survey- Equity, Fixed income, Cash, Sectors 2016.10
Bonds: -5pp @ -50% UW (between -60 & -20 extremes)
Cash: +0.3pp @ +5.8% OW (beyond +5.0 extreme high); back at a 15-year high
Commodities: +8pp @ 0% EW (between -20 & +12 extremes); a 4-year high
Regions…
    US: unch @ -7% UW
    Europe: unch @ +5% OW; continues recovery fm July’s a 3-year low
    Japan: +5pp @ -3% UW; up from a 4-year low
    Emerging Markets: +7pp @ +31% OW; another 3.5-year high
Sectors…
    Bearish: #Cash $XLK $XLF $VNQ $XLY
    Bullish: $GBP $EWU $ACWI
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Bullish #Contrarian

–Romeo

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