Diary of a Financier

Top Newsstuffs (December 11-17)

In Bookshelf on Sun 17 Dec 2017 at 05:51

Top reads from across the past week…

Macro (BULLISH)

Retail sales (November 2017)
by US Government Census

Another big acceleration, even higher above trend, with prior month’s upward revisions notwithstanding; the effects of Hurricanes Harvey and Irma are still positively skewing data, as manifest by building materials (+10.7% yoy), gas (+12.2%), and brick & mortar retailers (+10.4% “dead-cat bounce”); still expect the deceleration to resume as easy yoy comps taper into 2017YE/2018H1…
Core (ex-autos): +1.4pp @ +5.7% yoy, +1.0% mom (beat +0.7e); prior month revised higher
Headline: +1.2pp @ +5.8% yoy, +0.8% mom (beat +0.3e); prior month revised significantly higher
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

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

Inflation continues to straddle the Fed’s 2% target; energy is still leading headline gains (+9.4% ttm), but easy yoy comps taper into 2017YE/2018H1; everything else is in the sweet spot…
Core CPI (ex food & energy): -0.1 @ +1.7% ttm, +0.1% mom (miss +0.2e); remains at a 19-month low
Headline CPI: +0.2pp @ +2.2% ttm, +0.4% mom (meet +0.4e)
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 (2017.12.14)
by The American Association of Individual Investors (AAII)

Sentiment spikes, but remains barely within extremes; more importantly, the neutral cohort continues to recede — a sign of both broader-based participation and the wall-of-worry’s dismantling; “most are not currently making investment decisions based on the pending tax legislation”…
Bull/Bear ratio: +58bps wow @ 1.72x (above 1.30 historical average, within 1.00 – 1.80 extremes)
Bullish: +8.1pp @ 45.0% (above 39 avg, within 30 – 45 extremes)
Bearish: -6.1pp @ 26.1% (below 30 avg, within 25 – 40 extremes)
Neutral: -2.0pp @ 26.9% (below 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2018).
[Previously: Retail allocations remain barely 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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