Diary of a Financier

Top Newsstuffs (November 20-26)

In Bookshelf on Sun 26 Nov 2017 at 05:32

Top reads from across the past week…

Macro (BULLISH)

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

Even though headline data missed expectations by a mile and sequential data were negative, core growth maintained high velocity, only slightly missing consensus; inventory growth is still a bit hot, although it’s subject to an easy comp that won’t get lapped until 3/2018’s report (released in April); these above-trend growth rates should decelerate into year-end, as easy yoy comps taper…
– Core durable goods, new orders (ex-transportation): -0.1pp @ +7.4% yoy, +0.4% mom (miss +0.5e)
– Core capex, new orders (capital goods, ex-defense & aircraft): +0.3pp @ +8.1% yoy, -0.5% mom
– Core inventory (ex-transportation): +0.4pp @ +5.4% ytd, +0.2% mom
Durable goods account for ~8% of US GDP.
#Bullish! $XLI

 

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

S&P 500 valuation update: Growth rates continue to accelerate (2017.11.19)
by Fundamentalis

Despite slightly elevated multiples, a recovery in Energy (EPS +135% yoy Q3e) and acceleration in Tech (+9.5%) will naturally compress the market’s PE ratio; Earnings Yields also show attractive relative valuations (+100bps spread over Baa corporates)…
EPS (ntm): +0.40 mom @ $142.30
PE ratio (fw): unch mom @ 18.0x
PEG ratio: -13bps mom @ 1.70x; remains in trend compression as forward growth rate accelerates
Earnings yield: +1bp mom @ 5.52%
EPS growth rate (ntm): +0.96bps mom @ 10.77%

[See also: Modern capital markets warrant higher valuation multiples]
#Neutral #Valuations $SPY

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.11.16)
by The American Association of Individual Investors (AAII)

Sentiment procyclically plunges down to extremes indicative of a contrarian bullish signal; more importantly, the neutral cohort continues to recede — a sign of both broader-based participation and the wall-of-worry’s dismantling…Retail investor sentiment- bulls 2017.11.16
Bull/Bear ratio: -75bps wow @ 0.83x (below both 1.30 historical average and 1.00 – 1.80 extremes)
Bullish: -15.8pp @ 29.3% (below both 39 avg and 30 – 45 extremes); down from ytd high; largest sequential decline since 4/2013
Bearish: +12.1pp @ 35.2% (above 30 avg, within 25 – 40 extremes)
Neutral: +3.6pp @ 35.4% (above 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2018).
[Previously: Retail allocations remain neutral, Institutional allocations remain barely neutral, Strategist sentiment remains neutral & Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Neutral #Contrarian

 

Technicals (NEUTRAL)

 

–Romeo

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