Diary of a Financier

Top Newsstuffs (March 5-11)

In Bookshelf on Sun 11 Mar 2018 at 05:03

Here are your top reads from across the past week…


Trade balance (January 2018)
by US Department of Commerce

The deficit misses again, widening to even worst postcrisis levels despite a really weak USD, historically narrow energy deficit, and having lapped difficult yoy comps in 2017Q4; overall, gross trade volumes had been accelerating (a sign of strong global growth and domestic tailwinds from a cyclically weak USD), but it’s worth watching whether or not that changes after both this month’s sequential deceleration and Trump’s tariffs/trade wars; secularly declining petroleum imports and slower trade with China were also tailwinds, although both of these have started mounting again too…Trade balance 2018.01
Net exports: -16.2% yoy, -5.0% mom @ -$56.6B deficit (miss -$55.1e); prior month essentially unrevised
   Exports: +5.1% yoy, -1.3% mom
   Imports: +7.4% yoy, unch mom
The net balance of trade accounts for ~3 – 5% of US GDP (seasonally adjusted).
#Bearish! $DXY $UUP #EX #IM #NX #Globalization

Rail traffic monthly (February 2018)
by The Association of American Railroads (AAR)

This was a nice recovery from last month, as expected, but wasn’t enough to reattain high velocity yet (only +1.5% ytd now); plus, there’s a headwind in coming months as we’ve now lapped easy yoy comps…
Monthly traffic: +3.2pp @ +3.3% yoyRailtraffic 2018.02
Carload groups: 9 of 20 posted gains yoy
   Motor vehicles: -7.5% ytd
   Coal: -4.0% ytd; now post-recovery, having lapped its easy comp
   Energy: +5.2% ytd; continues recovery amidst easy yoy comps
In particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) has been negatively skewing the data.
#Neutral $IYT $XLB $XLE $DBC

Purchasing Managers Index (February 2018)
by Markit Economics

Global growth remains a multiyear highs with broad-based participation; however, some leading indicators are worrisome, including US Services headwinds and contraction in Southeast Asia…
Global PMI (Composite): +0.2 @ 54.8 (above 53.9 LT avg); highest since 3/2015
Global PMI (Services): +0.7 @ 54.8 (above 54.3 LT avg); highest since 11/2015
Global PMI (Manufacturing): -0.12@ 54.2 (above 51.4 LT avg); still highest level since 2/2011
US ISM (Composite): -0.2 @ 59.6; still strong growth and finally a bit of a tailwind; near cycle highs
– US ISM (Services): -0.4 @ 59.4 (beat 58.8e); maintains high velocity and crushes expectations; high inventories, tight employment, and high inflation would pose as headwinds were order flow not so strong; corresponds to +3.9% real GDP (annualized)
    New orders: +2.1 @ 64.8
   Inventories: +4.5 @ 53.5 (sentiment @ 61.0 “too high”)
    Backlog: +5.5 @ 56.0
   Prices: -0.8 @ 61.0
US ISM (Manufacturing): +1.7 @ 60.8 (beat 58.6e); another acceleration to lofty heights, as strong internals remain for coming months; however, inflation is officially at problematic levels and flows warn of potential capacity constraints; corresponds to +5.4% real GDP (annualized)
    New orders: -1.2 @ 64.2
   Backlog: +3.6 @ 59.8
   Prices: +1.5 @ 74.2
   Inventories: +4.4 @ 56.7 (customer inventories @ 43.7 “too low”)
Eurozone (Composite): -1.7 @ 57.1 (miss 57.5e); down from highest level since 6/2006; corresponds to +0.8% real GDP (annualized)
Eurozone (Services): -1.8 @ 56.2 (miss 56.7e); down from highest since 6/2006
Eurozone (Manufacturing): -1.0 @ 58.6 (beat 58.5e); down from a record high
China: official -1.0 @ 50.3 (miss 51.2e); unofficial +0.1 @ 51.6 (beat 51.4e)
Japan: -0.7 @ 54.1; down from highest level since 2/2014
UK: -0.1 @ 55.2
Canada: -0.3 @ 55.6
India: -2.3 @ 52.4; down from highest level since 12/2012
South Korea: -0.4 @ 50.3; last effects of Olympics 2018
Taiwan: +0.3 @ 56.9; highest since 4/2011
ASEAN: +0.5 @ 50.7
Brazil: +2.0 @ 53.2; near an 81-month high

#Bullish! $ACWI $EFA $EEM $DXY $UUP


Credit (NEUTRAL)


Fundamentals (BULLISH)


Valuations (BULLISH)


Sentiment (NEUTRAL)

Retail investor sentiment survey (2018.03.01)
by The American Association of Individual Investors (AAII)

Sentiment collapses all the way back down into extremes that are indicative of a contrarian bullish signal, with respondents citing anxiety over Trump’s tariffs and “trade wars” rhetoric; in fact, the neutral cohort returns to extremes that manifest a healthy wall-of-worry; this all signals the end of underperformance in the wake of January’s exuberance and subsequent correction (all as expected)Retail sentiment- bulls 2018.03.08, clearing the way for outperformance through 2018q3…
Bull/Bear ratio: -66bps wow @ 0.93x (below both 1.30 historical average and 1.00 – 1.80 extremes)
    Bullish: -10.9pp @ 26.4% (below both 39 avg and 30 – 45 extremes)Retail sentiment- neutrals 2018.03.08
    Bearish: +5.0pp @ 28.4% (below 30 avg, but within 25 – 40 extremes)
    Neutral: +5.9pp @ 45.2% (above both 31 avg and 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 8/2018).
[Previously: Retail allocations remain a bearish signalInstitutional allocations are a bearish signal; Strategist sentiment remains neutral; Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Bullish #Contrarian

Technicals (BEARISH)





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