Diary of a Financier

Top Newsstuffs (September 11-17)

In Bookshelf on Sun 17 Sep 2017 at 05:24

Top reads from across the past week…

Macro (BULLISH)

Retail sales (August 2017)
by US Government Census

After Amazon’s Prime Day helped stem the deceleration last month, this report maintained a healthy velocity; next month’s data will be impacted by Hurricanes Harvey and Irma; expect the deceleration to resume as easy yoy comps taper into YE…
Core (ex-autos): +0.2pp @ +3.6% yoy, +0.2% mom (miss +0.4e); prior month revised lower
Headline: -0.3pp @ +2.2% yoy, -0.2% mom (miss +0.1e); prior month revised significantly lower
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: Consumer confidence remains an extremely bullish signal & Income and consumption remain mixed/neutral signals]
#Bullish $XLY $XRT #tailwind

Inflation: Consumer Price Index (August 2017)
by Bureau of Labor Statistics (BLS)

Inflation remains decent, albeit below the Fed’s 2% target; energy is leading headline gains, although its easy yoy comps wane into YE; essentials like shelter (+3.3% yoy) and transportation (+3.5% yoy) are still running hot, offset by used cars (-3.8%)…
Core CPI (ex food & energy): unch @ +1.7% ttm, +0.2% mom (meet +0.2e); remains at a 19-month low
Headline CPI: +0.2pp @ +1.9% ttm, +0.4% mom (beat +0.3e)
Yellen has said she’d even tolerate higher run-rates, so don’t expect too hawkish of a tightening cycle from the Fed.
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral #Dovish $TIP

 

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.09.14)
by The American Association of Individual Investors (AAII)

Sentiment has an unprecedented surge from one extreme to another, transcending into a contrarian bearish signal…
Bull/Bear ratio: +104bps wow @ 1.88 (above both 1.30 historical average and 1.00 – 1.80 extremes)
Bullish: +12.0pp @ 41.3% (above 39 avg, within 30 – 45 extremes)
Bearish: -13.8pp @ 22.0% (below both 30 avg and 25 – 40 extremes); a 17-month low
Neutral: +1.8pp @ 36.7% (above 31 avg, below 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 3/2018).
[Previously: Retail allocations remain neutralStrategists’ consensus remains a neutral signal & Quantifying the “wall of worry”]
#Bearish #Contrarian

Global fund manager allocation survey (September 2017)
by Bank of America Merrill Lynch (BAML)

Global risk allocations remain in neutral territory, but US equities are flashing an even stronger bullish signal along with Energy, while EM and Europe remain bearish signals; the USD bear signal has waned…
– Equity: -4pp @ +34% OW (neutral signal, between +15 & +50 extremes)Institutional allocations 2017.09
– Bonds: +7pp @ -48% UW (neutral signal, above -60 extreme); up from a 3-year low
– Cash: -0.1pp @ +4.8% OW (neutral signal, below +5.0 extreme high)
– Commodities: +2pp @ -4% UW (neutral signal, between -20 & +12 extremes)
Regions…
    US: -8pp @ -28% UW (bullish signal, below -10 extreme); lowest since 11/2007
    Europe: unch @ +54% OW (bearish signal, above +35 extreme); near 3½-year highs
    Emerging Markets: +9pp @ +47% OW (bearish signal, above +40 extreme); a 7-year & alltime highs
 Sectors…
    Bearish signal: $EZU $XLF $EEM
    Bullish signal: $EWU $XLE $SPY
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Bullish! #Contrarian

Technicals (NEUTRAL)

 

–Romeo

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