Diary of a Financier

Top Newsstuffs (February 27 – March 5)

In Bookshelf on Sun 5 Mar 2017 at 06:54

Top reads from across the past week…

Macro

Personal income & outlays (January 2017)
by The Bureau of Labor Statistics (BLS)

While spending maintained its healthy velocity, income growth continued to decelerate a bit, but crucially, prior month data was revised significantly higher, making this a good enough report…Real DPI & PCE 2017.01
Disposable personal income (Real DPI): -0.3pp @ +2.0% yoy, -0.2% mom
Personal consumption expenditures (Real PCE): -0.2 @ +3.0% yoy, -0.3% mom
Personal savings rate: +0.1pp @ +5.5%
Consumer spending accounts for ~70% of US GDP, as this report is a broader measure than the Retail Sales reported earlier this month.
[Previously: Retail sales remain bullish & A new generation of Depression Babies?]
#Bullish $XLY #Wages

Consumer confidence survey (February 2017)
by Conference Board

Sentiment remains very strong, accelerating to new highs…Consumer confidence vs GDP 2017.02
Consumer confidence index: +3.2 mom @ 114.8 (beat 111.0e); a 15-year high; 85th percentile of historical data
[Previously: Retail sales remain bullish & A new generation of Depression Babies?]
#Bullish! $XLY

Purchasing Managers Index (February 2017)
by Markit Economics

Global growth remains strong, with tailwinds ahead considering the recovery in emerging Asia and the inventory repair in US…
Global PMI (Composite): -0.4 @ 53.5 (meet 53.9 LT avg); down from a 22-month highGlobal PMI composite 2017.02
Global PMI (Services): -0.7 @ 53.3 (below 54.3 LT avg); down from a 17-month high
Global PMI (Manufacturing): +0.2 @ 52.9 (above 51.3 LT avg); a 69-month high
US ISM (Composite): +1.8 @ 57.6 (above 54.6 post-recession avg); a 16-month high
– US ISM (Services): +1.1 @ 57.6 (beat 56.5e); accelerates even more; although inventories are a big of a headwind, backlog firmed-up too; corresponds to +3.4% real GDP (annualized)US PMI- ISM Services 2017.02
    New orders: +4.7 @ 65.1
    Production: +3.3 @ 63.6
    Backlog: +4.0 @ 54.0
    Inventories: +4.0 @ 51.2
    Inventory sentiment: +2.5 @ 64.5 (“too high”)
    Prices: +2.9 @ 59.0
US ISM (Manufacturing): +1.7 @ 57.7 (beat 56.1e); another big acceleration, again without Inventories’ tailwind meaningfully manifest, which suggests there’s still more room to run; inflation is running way too hot, but respondents seems to suggest that prices are encouraging present consumption; corresponds to +4.5% real GDP (annualized)
    New orders: +0.1 @ 60.4
    Production: +1.5 @ 62.9
    Backlog: +7.5 @ 57.0
    Prices: -1.0 @ 68.0
Eurozone (Composite): +1.6 @ 56.0 (meet 56.0e)
Eurozone (Services): +1.3 @ 55.5 (miss 55.6e)
Eurozone (Manufacturing): +0.2 @ 55.4 (miss 55.5 e)
UK: -1.1 @ 54.6; “[inflation measures] are still rising at near survey record rates [but] the recent easing… suggests that the impact of the weak [$GBP] input cost inflation surged to a survey record high… driven up by the weak sterling [$GBP] is starting to subside” #Brexit
Japan: +0.6 @ 53.3; a 35-month high
China: official +0.3 @ 51.6 (beat 51.1e); unofficial +0.7 @ 51.7 (beat 50.8e)
Canada: +1.2 @ 54.7; a 27-month high
India: +0.3 @ 50.7
South Korea: +0.2 @ 49.2
Taiwan: -1.1 @ 54.5
ASEAN: +0.3 @ 50.3; led by Vietnam at a 21-month high
Brazil: +2.9 @ 46.9
#Bullish $ACWI

Manufacturers’ durable & capital goods (January 2017)
by US Department of Commerce

While headline data beat expectations and this report continued the trend recovery, core data decelerated a touch; regardless, good to see capex get its footing after struggling for years with the mining/energy bust; after a much-needed drawdown in inventories, there should be a slight tailwind in coming months…
Core durable goods (ex-transportation)Core durable goods & capex- new orders (% change yoy) 2017.01
    Orders: -1.1pp @ +2.4% yoy, -0.2% mom (miss +0.5e)
Core capex (capital goods, ex-defense & aircraft)
    Orders: -2.3pp @ +0.5% yoy, -0.4% mom
Core inventory (ex-transportation)
    Inventories: -0.2pp @ -0.8% ytd, unch mom
#Neutral #Stagnation $XLI

Gross Domestic Product (Second estimate, 2016q4)
by Bureau of Economic Analysis (BEA)

After last quarter’s significant acceleration, Q4 still underwhelmed expectations after revision; net exports weighed significantly (as expected); growth was again aided by a meaningful tailwind from the re-stocking of Inventories (as expected after a stretch of drawdowns)…
Real GDP (Q3): unch @ +1.9% qoq saar (miss +2.1e)Real GDP 2016q4i
    Inflation: Core +2.0%; Headline +1.7%
    Consumption (PCE): +0.5pp @ +3.0%
    Investment: -1.5pp @ 9.2%; Residential +9.6%; Nonresidential +1.3%
    Government spending: -0.8pp @ +0.4%; Federal -1.2%; State & local +1.3%
    Exports: +0.3pp @ -4.0%
    Imports: +0.2pp @ +8.5%
    Inventories: +0.94pp contribution to GDP growth rate
Real GDP per capita (Q4): -1.7pp @ +1.0% yoy; 10.0% below LT regression trend
Real GDP (2016FY): +1.6% yoy
Real GDP (2015FY): unch @ +2.6% yoy
Real GDP (2014FY): unch @ +2.4% yoy
Real GDP (2013FY): unch @ +1.7% yoy
#Neutral

Sentiment

Retail investor sentiment survey (2017.03.02)
by The American Association of Individual Investors (AAII)

Sentiment remains a neutral signal, having recovered from February’s plunge…
Bull/Bear ratio: -13bps wow @ 1.06 (below 1.30 historical average, between 1.00 – 1.80 extremes)Retail sentiment- bulls & bears 2017.03.02
Bullish: -0.6pp @ 37.9% (below 39 avg, between 30 – 45 extremes)
Bearish: +3.3pp @ 35.6% (above 30 avg, between 25 – 40 extremes)
Neutral: -2.8pp @ 26.5% (below 31 avg); another post-Inauguration low
Measures respondents’ expectation for equity performance over next 6 months (through 7/2017).
[Previously: Institutional allocations remain neutralQuantifying the “wall of worry”]
#Neutral #Contrarian

Asset allocation survey (February 2017)
by The American Association of Individual Investors (AAII)

Allocations remain neutral signals…
– Stocks: -0.5pp @ 65.5% (between 60% average & 70% extreme high)
Bonds: +0.9pp @ 17.3% (between 16% avg & 10% extreme low); up from a 17-month low
Cash: -0.5pp @ 17.2% (between 24% avg & 15% extreme low)
#Neutral #Contrarian $SPY $AGG

–Romeo

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