Diary of a Financier

Top Newsstuffs (July 31 – August 6)

In Bookshelf on Sun 6 Aug 2017 at 05:27

Top reads from across the past week…

Macro (BULLISH)

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

Spending and income resumed their decelerations further away from trend GDP growth, and significant downward revisions have whittled away the savings rate; yoy comps get progressively easier for DPI and harder for PCE through year end…
Disposable personal income (Real DPI): -0.2pp @ +1.2% yoy, -0.1% mom; prior months revised higher
Personal consumption expenditures (Real PCE): -0.3pp @ +2.4% yoy, unch mom; prior months revised higher
Personal savings rate: -0.1pp @ +3.8%; prior months revised down significantly (from ~5.5% range)
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 & Consumer confidence remains extremely bullish]
#Neutral $XLY #Wages

Trade balance (June 2017)
by US Department of Commerce

The deficit wanes a bit, having hit its worst postcrisis level lest month; the difficult comps I had expected to weight on yoy data should be mitigated in the next report, due to USD’s mtd plunge; overall, the deficit is recovering, albeit still disappointing, considering healthy gross trade volumes, secularly declining petroleum imports, and slower trade with China…
Net exports: +0.4% yoy, +6.2% mom @ -$43.6B deficit (beat -$44.5B exp)
    Exports: +6% yoy, +1.25% mom
    Imports: +5% yoy, -0.16% mom
The net balance of trade accounts for ~3 – 5% of US GDP (seasonally adjusted).
#Neutral $DXY $UUP #EX #IM #NX #Globalization

Purchasing Managers Index (July 2017)
by Markit Economics

Global growth decelerates a touch, remaining decent thanks to Europe’s ossified growth offsetting both a deceleration from the US and real weakness across Emerging Markets…
Global PMI (Composite): -0.2  53.5 (below 53.9 LT avg); falls further from a 23-month high
Global PMI (Services): -0.1 @ 53.7 (below 54.3 LT avg); falls further from an 18-month high
Global PMI (Manufacturing): +0.1 @ 52.7 (above 51.4 LT avg); near a 6-year high
US ISM (Composite): -3.5 @ 53.9
(below 54.6 post-recession avg)
– US ISM (Services): -3.5 @ 53.9 (miss 56.9e); big deceleration below trend, as predicted by last month’s weak internals, which still warn of headwinds from spiking inventories sentiment and increasing inflation; corresponds to +1.9% real GDP (annualized)
    New orders: -5.4 @ 55.1
    Inventories: -1.0 @ 56.5 (sentiment +5.5 @ 67.5 “too high”)
    Backlog: -0.5 @ 52.0
    Prices: +3.6 @ 55.7
US ISM (Manufacturing): -1.5 @ 56.3 (miss 56.4e); velocity remains strong, with internals decelerating a bit; inflation spikes back up to troubling levels (heating-up due to plunging USD?); corresponds to +4.1% real GDP (annualized)
    New orders: -3.1 @ 60.4
    Backlog: -2.0 @ 55.0
    Prices: +7.0 @ 62.0
Eurozone (Composite): -0.6 @ 55.7 (miss 55.8e); corresponds to +0.6% real GDP (annualized)
Eurozone (Services): unch @ 55.4 (meet 55.4e)
Eurozone (Manufacturing): -0.8 @ 56.6 (miss 56.8e); down from a 6-year high
China: official +0.5 @ 51.7 (beat 51.0e); unofficial +0.7 @ 51.1
Japan: -0.3 @ 52.1; optimism set alltime highs, citing 2020 Tokyo Olympics
UK: +0.9 @ 55.1
Canada: +1.8 @ 55.5
India: -3.0 @ 47.9; lowest since 2/2009; “the introduction of the goods & services tax (GST) weighed heavily”
South Korea: -1.0 @ 49.1
Taiwan: +0.3 @ 53.6
ASEAN: -0.7 @ 49.3
Brazil: -0.5 @ 50.0

#Bullish $ACWI $EFA $EEM $DXY $UUP

Rail traffic monthly (July 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: -2.0pp @ +2.5% yoy
Growth rate: -1.4pp @ +3.1% ytd
Carload groups: 9 of 20 posted gains for the month yoy; led by Coal’s recovery (+16% 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 (2017.08.03)
by The American Association of Individual Investors (AAII)

Despite big swings, sentiment remains right within its neutral range; the persistently large natural cohort returns to normal levels…
Bull/Bear ratio: -30bps wow @ 1.12 (below 1.30 historical average, between 1.00 – 1.80 extremes)
Bullish: +1.7pp @ 36.1% (below 39 avg, between 30 – 45 extremes)
Bearish: +7.8pp @ 32.1% (above 30 avg, between 25 – 40 extremes); up from post-Election lows
Neutral: -9.4pp @ 31.8% (above 31 avg, below 40 extreme); down from post-Election highs
Measures respondents’ expectation for equity performance over next 6 months (through 1/2018).
[Previously: Institutional allocations remain a bullish signal, Strategists’ consensus remains a neutral signal & Quantifying the “wall of worry”]
#Neutral #Contrarian

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

Allocations remain neutral signals, but cash dropped to the lowest levels since 1/2000…
– Stocks: -0.9pp @ 67.9% (between both 60 average + 70 extreme high); down from a 12-year high
Bonds: +2.7pp @ 17.7% (above 16 avg)
Cash: -1.8pp @ 114.5% (below both 24 avg + 15 extreme low); a 17½ year low
#Neutral #Contrarian $SPY $AGG

Technicals (NEUTRAL)

 

 

–Romeo

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