Diary of a Financier

Top Newsstuffs (July 3-9)

In Bookshelf on Sun 9 Jul 2017 at 05:49

Top reads from across the past week…

Macro (BULLISH)

Trade balance (May 2017)
by US Department of Commerce

The deficit remains near its worst postcrisis levels, with some sequential improvement overshadowed by a continued yoy plunge, which should weigh on GDP until 11/2017 (due to difficult yoy comps & USD); this is disappointing, considering healthy gross trade volumes, secularly declining petroleum imports, and slower trade with China…
Net exports: -12% yoy, +2% mom @ -$46.5B deficit (miss -$46.2B exp)
    Exports: +5% yoy, +0.45% mom
    Imports: +7% yoy, -0.10% mom
The net balance of trade accounts for ~3 – 5% of US GDP (seasonally adjusted).
#Bearish $DXY $UUP #EX #IM #NX #Globalization

Purchasing Managers Index (June 2017)
by Markit Economics

Global growth remains strong, with tailwinds ahead considering ossifying growth in Europe, recovery in emerging Asia, and decent internals from the US…
Global PMI (Composite): -0.1  53.7 (below 53.9 LT avg); remains near a 23-month high
Global PMI (Services): -0.1 @ 53.8 (below 54.3 LT avg); remains near an 18-month high
Global PMI (Manufacturing): unch @ 52.6 (above 51.4 LT avg); near a 6-year high
US ISM (Composite): +0.7 @ 57.4
(above 54.6 post-recession avg)
– US ISM (Services): +0.5 @ 57.4 (beat 56.5e); good velocity maintained, but internals weakened, with high inventories starting to weigh on future production; corresponds to +3.3% real GDP (annualized)
    New orders: +2.8 @ 60.5
    Inventories: +3.5 @ 57.5 (sentiment @ 62.0 “too high”)
    Backlog: -4.5 @ 52.5
US ISM (Manufacturing): +2.9 @ 57.8 (beat 55.1e); velocity remains strong, with good internals prolonging the tailwind; inflation completes its deceleration back down to normal levels; corresponds to +4.6% real GDP (annualized)
    New orders: +4.0 @ 63.5
    Inventories: -2.5 @ 49.0
    Backlog: +2.0 @ 57.0
    Prices: -5.5 @ 55.0
Eurozone (Composite): -0.5 @ 56.3 (beat 55.7e); corresponds to “impressive” +0.7% real GDP (annualized)
Eurozone (Services): -0.9 @ 55.4 (beat 54.7e)
Eurozone (Manufacturing): +0.4 @ 57.4 (beat 57.3e); another 6-year high
China: official +0.5 @ 51.7 (beat 51.0e); unofficial +0.8 @ 50.4
Japan: -0.7 @ 52.4; down from almost 3-year highs
UK: -2.0 @ 54.3
Canada: -0.4 @ 54.7
India: -0.7 @ 50.9
South Korea: +0.9 @ 50.1
Taiwan: +0.2 @ 53.3
ASEAN: -0.5 @ 50.0
Brazil: -1.5 @ 50.5
; down from a 51-month high
#Bullish $ACWI

Rail traffic monthly (June 2017)
by The Association of American Railroads (AAR)

Another decent month maintains a solid velocity, chipping away at a multi-year decline — although it’s still attributable to easy yoy comps
Monthly traffic: -1.9pp @ +4.5% yoy
Growth rate: +2.2pp @ +4.5% ytd
Carload groups: 8 of 20 posted gains for the month yoy; led by Coal’s recovery (+18% ytd), albeit tempered by Energy’s continued collapse (-14% ytd)
In particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) has been negatively skewing the data.
#Bullish $IYT $XLB $XLE $DBC

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.07.06)
by The American Association of Individual Investors (AAII)

Sentiment drops ever so slightly into a bullish signal, with the Neutral cohort remaining outsized — manifesting the wall of worry…
Bull/Bear ratio: -11bps wow @ 0.99 (below both 1.30 historical average + 1.00 – 1.80 extremes)
Bullish: -0.1pp @ 29.6% (below both 39 avg + 30 – 45 extremes)
Bearish: +3.0 @ 29.9% (below 30 avg, between 25 – 40 extremes); up from ytd lows
Neutral: -2.9pp @ 40.5% (above 31 avg); down from a post-Election high
Measures respondents’ expectation for equity performance over next 6 months (through 12/2017).
[Previously: Institutional allocations remain a bullish signal & Quantifying the “wall of worry”]
#Bullish #Contrarian

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

Allocations remain neutral signals…
– Stocks: +1.4pp @ 68.8% (between 60% average & 70% extreme high)
Bonds: -0.5pp @ 15.0% (below 16% avg)
Cash: -0.9pp @ 16.3% (between 24% avg & 15% extreme low)
#Neutral #Contrarian $SPY $AGG

Strategist sentiment survey: Sell side consensus indicator (June 2017)
by Bank of America Merrill Lynch (BAML)

Signal continues its recovery, spiking higher, albeit still in neutral territory…
Equity allocation: +2.4pp @ 56.4% (below 57.7 average & 63.6 extreme high)
Indicator measures the average recommended equity allocation of Wall Street strategists.
#Neutral #Contrarian

Technicals (NEUTRAL)

 

–Romeo

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