Diary of a Financier

Top Newsstuffs (August 28 – September 3)

In Bookshelf on Sun 3 Sep 2017 at 05:45

Top reads from across the past week…

Macro (BULLISH)

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

Spending and income buck their decelerations, but remain mixed with the former outperforming the latter at the expense of savings; expect their velocities to recouple in coming months, as yoy comps get progressively easier for DPI and harder for PCE through year end…
Disposable personal income (Real DPI): +0.1pp @ +1.3% yoy, +0.2% mom; prior months revised higher
Personal consumption expenditures (Real PCE): +0.1pp @ +2.7% yoy, +0.2% mom; prior months revised higher
Personal savings rate: -0.3pp @ +3.5%; prior month revised down
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]
#Neutral $XLY #Wages

Consumer confidence survey (August 2017)
by Conference Board

Sentiment surges back to 16-year highs, although downward revision to prior month data halved the gains; respondents cited positive home prices, labor market, and the stock market…
Consumer confidence index: +2.9 mom @ 122.9 (beat 120.3e); 91st percentile of historical data
[Previously: Retail sales remain bullish]
#Bullish! $XLY

Gross Domestic Product (Second estimate, 2017q2)
by Bureau of Economic Analysis (BEA)

Good report meets expectations right near trend growth; consumptions and net exports outperformed higher-frequency data, likely aided by weak dollar at quarter-end, although yoy comps get harder though Q4; prior quarter was revised down slightly, but the bigger news is nice upward revisions to prior years…
Real GDP (Q2): revised +0.4pp @ +3.0% qoq saar (beat +2.8e)
    Inflation: Core +1.7%; Headline +1.5%
    Consumption (PCE): +0.5pp @ +3.3%
    Investment: +1.6pp @ +3.6%; Residential -6.5%; Nonresidential +6.9%
    Government spending: -1.0pp @ -1.0%; Federal +1.9%; State & local -1.7%
    Exports: -0.4pp @ +3.7%
    Imports: -0.5pp @ +1.6%
    Inventories: +0.02pp contribution to GDP growth rate
Real GDP per capita (Q2): unch @ 1.95% yoy; 9.6% below LT regression trend
Real GDP (2016FY): +1.5% yoy
Real GDP (2015FY): +2.9% yoy
Real GDP (2014FY): +2.6% yoy
Real GDP (2013FY): +1.7% yoy
#Bullish

 

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.08.31)
by The American Association of Individual Investors (AAII)

Sentiment continues its plunge deeper down into extremes, a big contrarian bull signal, as the Bearish cohort rises up near the highest levels of the Trump Presidency…
Bull/Bear ratio: -10bps wow @ 0.63 (below both 1.30 historical average and 1.00 – 1.80 extremes)
Bullish: -3.1pp @ 25.0% (below both 39 avg and 30 – 45 extremes)
Bearish: +1.6pp @ 39.9% (above 30 avg, between 25 – 40 extremes)
Neutral: +1.5pp @ 35.1% (above 31 avg, below 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 2/2018).
[Previously: Institutional allocations remain a bullish signal, Strategists’ consensus remains a neutral signal & Quantifying the “wall of worry”]
#Bullish! #Contrarian

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

Allocations remain neutral signals…
– Stocks: -1.1pp @ 66.8% (between both 60 average + 70 extreme high); down further from a 12-year high
Bonds: -0.4pp @ 17.3% (above 16 avg)
Cash: +1.5pp @ 16.0% (between 24 avg + 15 extreme low); up from the lowest level since 1/2000
#Neutral #Contrarian $SPY $AGG

 

Technicals (NEUTRAL)

S&P 500 deconstructed: Components at new highs vs new lows (August 2017)
Bank of America Merrill Lynch (BAML)

Comparing the number of SPX stocks at 52-week highs vs those at 52-week lows revels both a loss of momentum, leadership, and another internal correction in the works; BAML also notes the top-heaviness of the market cap-weighted index, which has a handful of its biggest constituents (all tech companies) asymmetrically skewing performance…
Net highs vs lows: -6.14pp (lowest since 2/2016 internal correction)
    Stocks at 52-week highs: 1.58%
    Stocks at 52-week lows: 7.72% (most since 2/2016)
#Bearish $SPY $RSP $XLK $QQQ #FANG #FAANG Market breadth #Bear market #Wall of worry

 

–Romeo

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