Diary of a Financier

Top Newsstuffs (December 25-31)

In Bookshelf on Sun 31 Dec 2017 at 05:38

Happy New Year (ish)! Here are your top reads from across the past week…

Macro (BULLISH)

Consumer confidence survey (December 2017)
by Conference Board

Sentiment retraces a bit of last month’s spike to secular highs, maintaining high velocity despite missing expectations…
Consumer confidence index: -6.5 mom @ 122.1 (miss 128.0e); down from highest level since 11/2000; prior month revised lower
[Previously: Retail sales remain bullish]
#Bullish $XLY

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

S&P 500 valuation update: Growth rates continue to accelerate (2017.12.22)
by Fundamentalis

Despite slightly elevated multiples, a recovery in both Energy (EPS +37.5% yoy 2018FYe) and Materials (+17.5%), plus an acceleration in Financials (+15.7%) will naturally compress valuations; Earnings Yields have managed to maintain attractive relative valuations (+106bps spread over Baa corporates) despite rising rates…
EPS (ntm): +0.58 mom @ $142.88
PE ratio (fw): +0.8 mom @ 18.8x
PEG ratio: -2bps mom @ 1.68x; remains in trend compression as forward growth rate is still accelerating
Earnings yield: -19bp mom @ 5.33%
EPS growth rate (ntm): +0.38bps mom @ 11.15%

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

Sentiment (NEUTRAL)

Retail investor sentiment survey (2017.12.28)
by The American Association of Individual Investors (AAII)

Sentiment continues to rally, pushing everything deeper into a bearish signal; all signs suggest this market cycle has achieved broader-based participation with the wall-of-worry having been dismantled…
Bull/Bear ratio: +59bps wow @ 2.56x (above both 1.30 historical average and 1.00 – 1.80 extremes)
Bullish: +2.2pp @ 52.7% (above both 39 avg and 30 – 45 extremes); highest since 11/2014
Bearish: -5.0pp @ 20.6% (below both 30 avg and 25 – 40 extremes)
Neutral: +2.8pp @ 26.7% (below 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2018).
[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]
#Bearish! #Contrarian

Technicals (NEUTRAL)

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

Margin debt levels continue their acceleration to new record highs, remaining in reasonable proportion to market performance, although the mounting releveraging trend requires monitoring were it to decouple from SPX; yoy comps are still misrepresentative due to a low base, but they’re now lapping that into 2017YE and 2018Q1…
Nominal margin debt: +3.5% mom, +16.1% yoy @ $580.9B; another alltime high
Net credit (“buying power”): -6.4% mom, -44.9% yoy @ -$286.9B debit; another 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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