Diary of a Financier

Top Newsstuffs (November 14-20)

In Bookshelf on Sun 20 Nov 2016 at 06:39

Top reads from across this week…

Macro

Retail sales (October 2016)
by US Government Census

Another great report crushes expectations, even with big upward revisions to prior months; yoy growth accelerates even higher above trend GDP, despite headline data lapping energy’s yoy comp tailwind…Retail sales ($gross & %change yoy, 2016.10)
Core (ex-autos): +1.3pp @ +4.0% yoy, +0.8% mom (beat +0.4e); prior months revised higher
Headline: +1.6pp @ +4.3% yoy, +0.8% mom (meet +0.6e); prior months revised significantly higher
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: Consumer confidence maintains bullish signal, Income & consumption remain bullish signals & Consumption boom or depression babies?]
#Bullish! $XLY

Housing permits, starts & completions (October 2016)
by US Government Census

Report crushes expectations, even with a major upward revision to the prior month; this growth leader has re-accelerated with spikes across-the-board, including the flagging multi-family category (although that particular boom is still likely over); the expected tailwind from permits’ flow-through was indeed manifest…Housing starts 2016.10
Monthly housing starts:  +35.2pp @ +23.3% yoy, +25.5% mom @ 1.323M saar (beat 1.168e); prior months revised up
Growth rate:  +2.2pp @ +5.9% ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17 & Expect home sales to soften in 2016 due to low inventories]
#Bullish! $XHB $ITB

Inflation: Consumer Price Index (October 2016)
by Bureau of Labor Statistics (BLS)

Perfect report with inflation remaining in the ballpark of the Fed’s 2% target; energy’s drag has officially ended; remember that Yellen has said she’d tolerate higher inflation…
Core CPI (ex food & energy): -0.1pp @ +2.1% ttm, +0.1% mom (miss +0.2e)
Headline CPI: +0.1pp @ +1.6% ttm, +0.4% mom (meet +0.4e)Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.10
    Energy: +3.0pp @ 0.1% ttm, +3.5% mom
    Healthcare services: -0.7pp @ +4.1% ttm, unch mom
    Used cars: unch @ -4.1% ttm, -0.1% mom
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Bullish

Fundamentals

S&P 500 valuation update: Progressing into easy comps (2016.11.12) | Fundamentalis
Even with earnings expectations rallying, the market is finally enjoying some multiple expansion after Trump’s election; sentiment is clearly improving as SPX enters a seasons’ worth of easy yoy comps due to China’s collapse & the energy crash (respectively)…
EPS (ntm): -13c wow @ $128.43
PE ratio (fw): +10bps wow @ 16.85x
PEG ratio: -4bps wow @ 4.50x; continues compression as forward growth rate accelerates
Earnings yield: -12bps wow @ 5.96%
EPS growth rate (ntm): +10bps wow @ 3.69%

[See also: Healthcare sector upward revisions defy seasonality ($XLV)]
#Neutral #Valuations $SPX $SPY

Sentiment

Retail investor sentiment survey (2016.11.17)
by The American Association of Individual Investors (AAII)

Sentiment spikes up into a neutral signal due to Presidential Election (N.B. half of data was collected before Election Night); the  persistently outsized Neutral cohort wanes too — a sign of less uncertainty…
Bull/Bear ratio: +64bps wow @ 1.33 (above 1.30 historical average, but between 1.00 – 1.80 extremes)Retail investor sentiment- bulls & bears 2016.11.17
Bullish: +7.8pp @ 46.7% (over both 39 avg & 30 – 45 extremes); highest since 2/2015
Bearish: -2.8pp @ 26.6% (below 30 avg, but between 25 – 40 extremes)
Neutral: -5.0pp @ 26.8% (below 31 avg); a 2-year low
Measures respondents’ expectation for equity performance over next 6 months (through 4/2017).
[Previously: Institutional allocations remain an extremely bullish signal & Retail allocations remain neutral]
#Neutral #Contrarian

–Romeo

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