Diary of a Financier

Top Newsstuffs (November 27 – December 3)

In Bookshelf on Sun 3 Dec 2017 at 05:36

Top reads from across the past week…

Macro (BULLISH)

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

Good report essentially exceeds expectations, closing the otherwise problematic gap between stagnant income and growing consumption, as expected; these growth rates should fully recouple in coming months, as yoy comps get progressively easier for DPI and harder for PCE through year end…
Disposable personal income (Real DPI): +0.4pp @ +1.6% yoy, +0.3 mom
Personal consumption expenditures (Real PCE): -0.1pp @ +2.6% yoy, +0.1% mom; prior months revised slightly lower
Personal savings rate: +0.1pp @ +3.2%
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 (November 2017)
by Conference Board

Sentiment spikes again, crushing expectations despite an upward revision to prior month; reaches a new 17-year high as the holiday season approaches…
Consumer confidence index: +3.3 mom @ 129.5 (beat 124.0e); 93rd percentile of historical data; highest since 11/2000; prior month revised higher
[Previously: Retail sales remain bullish]
#Bullish! $XLY

Gross Domestic Product (Second estimate, 2017q3)
by Bureau of Economic Analysis (BEA)

A nice upward revision meets expectations, with growth rising higher above trend; an bump in investment led the acceleration; despite downward revisions, consumption and net exports outperformed higher-frequency data, likely aided by the weak dollar at quarter-end, although yoy comps get harder though Q4…
Real GDP (Q2): revised +0.3pp @ +3.3% qoq saar (meet +3.3e)
    Inflation: Core +1.6%; Headline +2.1%
    Consumption (PCE): -0.1pp @ +2.3%
    Investment: +1.3pp @ +7.3%; Residential -5.1%; Nonresidential +4.7%
    Government spending: +0.5pp @ +0.4%; Federal +1.3%; State & local -0.1%
    Exports: -0.1pp @ +2.2%
    Imports: -0.3pp @ -1.1%
    Inventories: +7bps @ +0.80pp contribution to GDP growth rate
Real GDP per capita (Q3): +0.12pp @ 2.34% yoy; 9.3% 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 (2017.11.30)
by The American Association of Individual Investors (AAII)

Sentiment returns to norms after a procyclical plunge two weeks ago; 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: -10bps wow @ 1.14x (below 1.30 historical average, within 1.00 – 1.80 extremes)
Bullish: +0.5pp @ 35.9% (above 39 avg , within 30 – 45 extremes)
Bearish: +2.6pp @ 31.6% (above 30 avg, within 25 – 40 extremes)
Neutral: -3.1pp @ 32.4% (above 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2018).
[Previously: 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

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

Allocations remain neutral signals, although they’re nearing a contrarian bearish signal as cash reaches an 18-year low…
– Stocks: +0.6pp @ 68.6% (above 60 average, within 70 extreme high); remains near a 12-year high
Bonds: +0.7pp @ 17.6% (above 16 avg)
Cash: -1.2pp @ 13.9% (below both 24 avg and 15 extreme low); lowest level since 12/1999
#Neutral #Contrarian $SPY $AGG

Technicals (NEUTRAL)

NYSE margin debt & balances (October 2017)
by Doug Short (dshort’s Advisor Perspectives)

Margin debt levels continue acceleration to record highs, remaining in reasonable proportion to market performance, although the mounting releveraging trend requires monitoring due to recent decoupling; yoy comps are still misrepresentative due to a low base, but they’re now lapping that into year-end…
Nominal margin debt: +0.3% mom, +16.0% yoy @ $561.4B; a new alltime high
Net credit (“buying power”): -16.0% mom, -48.1% yoy @ -$269.7B debit; a new alltime low
[See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007]
#Neutral #Leverage #Lagging indicator

 

–Romeo

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