Diary of a Financier

Top Newsstuffs (April 9-15)

In Bookshelf on Sun 15 Apr 2018 at 05:48

Here are your top reads from across the past week…

Macro (BULLISH)

Inflation: Consumer Price Index (March 2018)
by Bureau of Labor Statistics (BLS)

Inflation rallies back above the Fed’s 2% target, but energy’s positive skew on headline is still waning (-2.8% mom/+7.0% ttm) as easy yoy comps taper throughout 2018H1; everything else averages out right around the sweet spot…
Core CPI (ex food & energy): +0.3pp @ +2.1% ttm, +0.2% mom (meet +0.2e); remains at a 20-month low
Headline CPI: +0.2pp @ +2.4% ttm, -0.1% mom (miss unch exp)
FOMC minutes have returned the Fed’s target to 2%, rescinding their 2.5% temporary increase made in 12/2012.
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral #Dovish $TIP

Credit (NEUTRAL)

Loans & leases in bank credit, all commercial banks (2018.03.28)
by St. Louis Federal Reserve (FRED)

Lending growth remains soft after a big 2017 deceleration down to multi-year lows, but it is starting to recover, as expected, now that we’re lapping difficult comps left in the wake of 2015/16’s industrial production slowdown
Weekly loan growth: +51bps mom @ +4.51% yoy (below 7.3% historical average)
This is a key indicator; although the Fed’s rising rates & Trump’s deregulation jawboning should increase NIMs and corporate debt is relatively bloated, I’d still expect continued, aggregate credit expansion, since household balance sheets are more deleveraged than at any point since the 1970s.
[Previously: Households remain extremely deleveraged; See also: Senior loan officer survey expects bank credit supply & demand fundamentals to remain neutral]
#Bearish #Releveraging!? #Credit cycle $XLF $KBE $KRE

Fundamentals (BULLISH)

 

Valuations (BULLISH)

 

Sentiment (NEUTRAL)

Retail investor sentiment survey (2018.04.12)
by The American Association of Individual Investors (AAII)

Sentiment wades deeper into extremes of a contrarian bull signal, after having already completed a schizophrenic round trip in Q1; respondents still cited anxiety over Trump’s tariffs and “trade wars” rhetoric; “[such] unusually low levels of optimism [and] unusually high levels of pessimism have historically been followed by above-average 6- and 12-month returns for the S&P 500″…
Bull/Bear ratio: -26bps wow @ 0.61x (below both 1.30 historical average and 1.00 – 1.80 extremes)
    Bullish: -5.8pp @ 26.1% (below both 39 avg and 30 – 45 extremes)
    Bearish: +6.1pp @ 42.8% (above both 30 avg and 25 – 40 extremes)
    Neutral: -0.3pp @ 31.2% (above 31 avg, but within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 10/2018).
[Previously: Retail allocations barely remain a bearish signal; Institutional allocations return to a neutral 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 (NEUTRAL)

 

–Romeo

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