The document provides an analysis of the stock market and economic outlook from the perspective of investment strategists Bruce Bittles and William Delwiche of RWBaird.
The summary includes:
1) Economic data supports continued but slower GDP growth in 2019 of around 2.5% according to leading indicators and a strong labor market.
2) Stock prices declined in Q4 due to recession concerns but a strong jobs report in December calmed fears, suggesting the Fed may pause rate hikes.
3) Technically, the stock market has improved, downside momentum has been broken, and sentiment indicators show pessimism, suggesting further stock price gains are likely.
Weekly Market Notes for January 14, 2019Sarah Cuddy
Fundamentally, the economy seems solid with good job growth, rising wages, and optimistic consumers, which supports stocks. However, uncertainties remain around earnings, Fed policy, trade talks, debt levels, and global growth.
Technically, the market has seen significant improvement, suggesting further upside. Downside momentum has broken and breadth is improving, though a retest of lows is possible.
Weekly Market Notes for January 28, 2019Sarah Cuddy
The Fed is expected to pause its tightening cycle and possibly reduce its balance sheet at a slower pace to support continued modest economic growth. Technically, short-term market breadth has improved but long-term breadth measures need to strengthen further for odds of a successful retest of December lows. Defensive sectors currently show strongest relative strength.
- The stock market climbed to new record highs last week, supported by strong corporate profit growth and improving global economies. Earnings are being boosted by recent tax legislation and a weak U.S. dollar.
- 81% of companies so far this earnings season have reported quarterly sales above estimates, which would be a record high percentage. However, investor optimism is approaching euphoria, which is worrisome given market tops occur at maximum optimism.
- Fourth quarter GDP grew at an annual rate of 2.6%, below expectations of 2.9%, but strong consumer spending suggests continued economic growth. The focus this week will be on Friday's jobs report.
- The stock market reached new record highs last week as optimism has grown due to strong economic expansion and upward revisions to corporate earnings estimates.
- Sentiment indicators show excessive investor optimism, though divergences that typically precede declines are absent currently.
- Inflation remains contained, allowing the Federal Reserve to gradually raise interest rates. The markets expect two to three rate hikes in 2018.
- The report recommends allocating new funds to the strongest performing sectors such as consumer discretionary, materials, energy and financials.
- The stock market was little changed last week despite most companies beating earnings estimates. Strong US economic data is offset by concerns over trade conflicts and slowing growth in Europe and China.
- Commodity prices have declined in recent months, which is a concern as commodity prices often predict the health of the global economy. Defensive sectors have outperformed cyclical sectors since May.
- With midterm elections approaching and investor optimism high, a cautious approach is recommended due to risks of a market correction. Investors should focus on defensive sectors like healthcare, utilities, and consumer staples.
Weekly Market Notes for January 22, 2019Sarah Cuddy
The stock market rally of the past month is showing signs of slowing as underlying economic and market uncertainties remain. While the technical indicators show improved market breadth and reduced downside momentum, sentiment indicators suggest the market may be vulnerable to a trend change. The outlook calls for positive but modest returns in 2019 with an intermediate level of uncertainty, recommending a cautious approach.
- The US stock market performance was mixed last week, with the S&P 500 and Dow posting gains while the NASDAQ fell 1% and Russell 2000 dropped almost 2%.
- Recent economic data shows continued strong growth in the US economy in the second quarter, although home sales are weakening.
- Sentiment indicators are neutral or bearish, suggesting the stock market may remain in a trading range. The technical picture is also clouded until late in the year.
- This week the focus will be on the upcoming Fed meeting for any changes to interest rate expectations, as well as earnings reports including from Apple on Tuesday.
Weekly Market Notes for February 4, 2019Sarah Cuddy
The stock market had its strongest start to a year since 1987 due to better-than-expected earnings and a dovish stance from the Federal Reserve. However, concerns remain about the global economy and earnings growth. The authors recommend a balanced portfolio approach including defensive sectors like REITs, utilities, and consumer staples as well as cyclical sectors exhibiting relative strength like industrials and communication services. Sentiment indicators have reversed from pessimism to optimism, warranting short-term caution.
Weekly Market Notes for January 14, 2019Sarah Cuddy
Fundamentally, the economy seems solid with good job growth, rising wages, and optimistic consumers, which supports stocks. However, uncertainties remain around earnings, Fed policy, trade talks, debt levels, and global growth.
Technically, the market has seen significant improvement, suggesting further upside. Downside momentum has broken and breadth is improving, though a retest of lows is possible.
Weekly Market Notes for January 28, 2019Sarah Cuddy
The Fed is expected to pause its tightening cycle and possibly reduce its balance sheet at a slower pace to support continued modest economic growth. Technically, short-term market breadth has improved but long-term breadth measures need to strengthen further for odds of a successful retest of December lows. Defensive sectors currently show strongest relative strength.
- The stock market climbed to new record highs last week, supported by strong corporate profit growth and improving global economies. Earnings are being boosted by recent tax legislation and a weak U.S. dollar.
- 81% of companies so far this earnings season have reported quarterly sales above estimates, which would be a record high percentage. However, investor optimism is approaching euphoria, which is worrisome given market tops occur at maximum optimism.
- Fourth quarter GDP grew at an annual rate of 2.6%, below expectations of 2.9%, but strong consumer spending suggests continued economic growth. The focus this week will be on Friday's jobs report.
- The stock market reached new record highs last week as optimism has grown due to strong economic expansion and upward revisions to corporate earnings estimates.
- Sentiment indicators show excessive investor optimism, though divergences that typically precede declines are absent currently.
- Inflation remains contained, allowing the Federal Reserve to gradually raise interest rates. The markets expect two to three rate hikes in 2018.
- The report recommends allocating new funds to the strongest performing sectors such as consumer discretionary, materials, energy and financials.
- The stock market was little changed last week despite most companies beating earnings estimates. Strong US economic data is offset by concerns over trade conflicts and slowing growth in Europe and China.
- Commodity prices have declined in recent months, which is a concern as commodity prices often predict the health of the global economy. Defensive sectors have outperformed cyclical sectors since May.
- With midterm elections approaching and investor optimism high, a cautious approach is recommended due to risks of a market correction. Investors should focus on defensive sectors like healthcare, utilities, and consumer staples.
Weekly Market Notes for January 22, 2019Sarah Cuddy
The stock market rally of the past month is showing signs of slowing as underlying economic and market uncertainties remain. While the technical indicators show improved market breadth and reduced downside momentum, sentiment indicators suggest the market may be vulnerable to a trend change. The outlook calls for positive but modest returns in 2019 with an intermediate level of uncertainty, recommending a cautious approach.
- The US stock market performance was mixed last week, with the S&P 500 and Dow posting gains while the NASDAQ fell 1% and Russell 2000 dropped almost 2%.
- Recent economic data shows continued strong growth in the US economy in the second quarter, although home sales are weakening.
- Sentiment indicators are neutral or bearish, suggesting the stock market may remain in a trading range. The technical picture is also clouded until late in the year.
- This week the focus will be on the upcoming Fed meeting for any changes to interest rate expectations, as well as earnings reports including from Apple on Tuesday.
Weekly Market Notes for February 4, 2019Sarah Cuddy
The stock market had its strongest start to a year since 1987 due to better-than-expected earnings and a dovish stance from the Federal Reserve. However, concerns remain about the global economy and earnings growth. The authors recommend a balanced portfolio approach including defensive sectors like REITs, utilities, and consumer staples as well as cyclical sectors exhibiting relative strength like industrials and communication services. Sentiment indicators have reversed from pessimism to optimism, warranting short-term caution.
The document summarizes an analyst's downgrade of the consumer staples sector from overweight to neutral based on two key factors: 1) Earnings estimates have declined and valuations have increased for the sector, weakening its fundamentals. 2) Canadian consumer spending growth has slowed significantly, reducing the sector's leverage to the Canadian consumer. The analyst expects a more sluggish performance from the staples sector going forward given these factors.
The SVB Asset Management Economic Report, Q2 2017, is a review of and outlook on economic factors that impact global markets and business health.
In this edition, the team discusses the U.K.’s Article 50 notice and the FOMC’s current path towards normalization. The report also examines the Trump Administration’s first 100 days in office and current business sentiment.
Weekly Market Notes for August 14, 2017Sarah Cuddy
Summary
Economy: Consumer Comfort Index jumps to 16-year high; inflation data shows CPI rising at 1.7% year-over-year; wholesale prices (PPI) declined in July
Fed Policy: Weak inflation data triggers decline in expectations the Fed will raise rate again in 2017
Sentiment: Indicators of investor psychology show optimism excessive
Strongest Sectors: Financials remain near top in relative strength - long-term bullish indicator for stocks
Weekly Market Notes for October 8, 2018Sarah Cuddy
- The stock market hit new highs after a revised trade deal between the US, Mexico, and Canada, but gains were capped by a rise in interest rates that sent stocks lower. Unemployment is at a 50-year low and economic indicators are strong, putting pressure on the Federal Reserve to continue raising interest rates. Third quarter earnings reports will begin this week and are expected to show 17% growth for S&P 500 companies. However, rising costs could threaten profit margins going forward. Investors are advised to focus on the health care and industrial sectors. Technical indicators suggest the market may be due for a pullback until breadth improves and pessimism rises.
The document provides a quarterly commentary and market observations from Macinv. In the first quarter, skepticism remained among investors but market sell-offs were less dramatic than previous years. Government policies are adjusting to stabilize fiscal situations. US GDP is expected to grow 2-2.5% in 2013. The Fed will continue quantitative easing and low interest rates. Key components of the US economy like home and auto sales showed growth in the first quarter. Macinv's portfolio performed well led by coal, transportation, and healthcare stocks. Natural Resource Partners and Norfolk Southern were top performers while CenturyLink underperformed after cutting its dividend.
RFG is a food retailer headquartered in Gold Coast, QLD that operates franchises across Australia and internationally. It has pursued aggressive growth through acquisitions, most recently acquiring Hudson Pacific, which will provide inventory supply to franchises and create a vertical supply chain. The report forecasts RFG's revenue to increase 50% due to Hudson, though increased operating costs are expected to offset profit growth in the near term. The share price is recommended to be a hold.
Retail Food Group - Analysis Report - Group 5Giang Nguyen
Retail Food Group (RFG) operates food franchises and company-owned stores in Australia, New Zealand, and Asia. While macroeconomic factors present challenges, RFG has maintained profitability through market share gains using strategic acquisitions and initiatives. Financially, RFG has enjoyed growth since acquiring Esquire Coffee in 2011. However, two major restructuring projects in 2014 may impact results that year. The report recommends holding the stock until the success of these projects is clear.
Weekly Market Notes for October 29, 2018Sarah Cuddy
- The major US stock indexes fell nearly 4% last week as rising interest rates, tariffs, and mixed corporate earnings continued to weigh on markets.
- Defensive sectors like utilities, consumer staples, and healthcare have been market leaders, but leadership may shift to materials, consumer discretionary, and technology if a market bottom is identified.
- Economic data shows continued US growth in the third quarter of 3.5%, but inflation pressures have subsided. The Fed is expected to raise rates again in December.
The document provides a research report from Krause Fund recommending Alcoa Inc. (NYSE: AA) as a strong buy. It summarizes Alcoa's business operations, current stock performance, financial ratios, and provides an analysis of key economic indicators and how they may impact Alcoa's future performance. The analysts initiate coverage with a buy rating and $18-20 price target due to Alcoa's shift toward more profitable downstream products, potential for market share gains, and expectations that recent restructuring efforts will allow it to execute on goals leading to long term share gains.
Duff & Phelps' Capital Markets Insights - Spring 2018 report states that leveraging costs and structures showed signs of increasing volatility in the first quarter of 2018, as markets reacted to rising economic growth, inflation concerns and trade tensions. Read the report for more detail.
Capital Markets Industry Insights - Fall 2016Duff & Phelps
Middle-market issuers were greeted by strong demand this quarter from mainstream credit sources as well as those seeking higher degrees of risk and return. Macroeconomic fundamentals continued to improve, though the focus remained on monetary policy. With an increasingly stark dichotomy of views at the Federal Reserve, volatility persisted in anticipation of clearer guidance on the pace and timing of rate hikes.
Summary
Economy: Housing rebounds –starts
increase for first time in four months – Building
permits climb the most since fourth quarter
2015; Conference Board’s Leading Economic
Index climbs most since December
Fed Policy: Policy committee meets July 25-
26 – no change expected in interest rates
Sentiment: Indicators of investor psychology
show optimism ticking up last week
Strongest Sectors: Financials, tech,
materials, industrials and health care
Borrowing costs for middle-market debt issuers generally declined during the third quarter, despite a modest increase in leverage levels and little change in benchmark rates. The Fed, as expected, left benchmark interest rates unchanged in the third quarter, but did announce a program to gradually reduce its balance sheet from $4.5 trillion (a result of recessionary quantitative easing) to $3 trillion over the next three years. Thus, the prevailing combination of low borrowing costs, high leveragability and a generally benign default rate outlook, presents an attractive backdrop for issuance. This "perfect storm" of market conditions provides a compelling (albeit narrowing) window for middle-market issuers.
The stock market broke a two-week losing streak last week, with the S&P 500 gaining 1.5%. Recent economic data points to continued strong GDP growth of around 3% annually. June jobs numbers were better than expected and the unemployment rate remains low. While some indicators show defensive sectors gaining and market breadth narrowing, overall economic strength supports the stock market, though volatility may increase in the summer due to mid-term elections.
Economic and Financial Analysis of Real Estate / REIT Industry (2014 Class Pr...Alexander M. Stearns
In April 2014, I evaluated the economic and real estate industry conditions and compared the merits of 4 real estate investment trust (REIT) securities through business life cycles, key financials, and DuPont analysis. Attached is a 14p. sample of the 40p. report.
The document provides an overview and analysis of capital markets activity in the summer of 2017. Some key points:
- Middle-market loan and debt issuance was robust, helped by strong M&A activity and refinancing. Leverage multiples increased.
- The Federal Reserve raised interest rates again but longer-term bond yields declined, reflecting moderating growth expectations.
- Corporate borrowing and profits remained strong despite political uncertainty. Near-term conditions remained favorable for middle-market issuers seeking financing.
The MNI Russia Consumer Indicator fell 5.4% in March to its lowest level since the survey began in 2013, as concerns over household finances, short-term business conditions, and spending declined sharply due to worries over Russia's actions in Ukraine. Current personal finances reached a series low while expectations for business conditions in one year also fell sharply. Overall consumer confidence in Russia has dropped more than 10% since the start of 2014.
- The major US stock indices declined last week in response to President Trump's announcement of tariffs on steel and aluminum imports. Investors are concerned about higher costs being passed onto consumers.
- Economic growth and employment remain strong, but investors are dealing with uncertainty around trade policy and interest rates. The Fed expects three rate hikes in 2018 with a potential for a fourth.
- For the stock market decline to be considered a correction, analysts want to see improvements in market breadth indicators and investor sentiment gauges. Most measures of sentiment currently show neutral or bearish views.
Weekly Market Notes for November 12, 2018Sarah Cuddy
The stock market gained over the past two weeks following the midterm elections. However, ongoing risks like rising interest rates and trade tensions could lead to increased volatility. Defensive sectors like healthcare and consumer staples are recommended for investors. Most market breadth indicators remain weak, suggesting upside may be limited without signs of broader participation. Historically, leadership shifts to cyclical and small cap stocks after elections, but currently defensive sectors show stronger relative strength.
Weekly Market Notes for November 19, 2018Sarah Cuddy
- The stock market broke a two-week winning streak last week, declining nearly 2%, as concerns remain about rising interest rates, trade issues, and slowing global growth.
- Defensive sectors like utilities and consumer staples have outperformed recently. Analysts recommend maintaining a cautious approach given technical indicators showing market downtrends.
- The document provides an overview of recent market performance and factors, along with recommendations to remain cautious given ongoing uncertainties.
The document summarizes an analyst's downgrade of the consumer staples sector from overweight to neutral based on two key factors: 1) Earnings estimates have declined and valuations have increased for the sector, weakening its fundamentals. 2) Canadian consumer spending growth has slowed significantly, reducing the sector's leverage to the Canadian consumer. The analyst expects a more sluggish performance from the staples sector going forward given these factors.
The SVB Asset Management Economic Report, Q2 2017, is a review of and outlook on economic factors that impact global markets and business health.
In this edition, the team discusses the U.K.’s Article 50 notice and the FOMC’s current path towards normalization. The report also examines the Trump Administration’s first 100 days in office and current business sentiment.
Weekly Market Notes for August 14, 2017Sarah Cuddy
Summary
Economy: Consumer Comfort Index jumps to 16-year high; inflation data shows CPI rising at 1.7% year-over-year; wholesale prices (PPI) declined in July
Fed Policy: Weak inflation data triggers decline in expectations the Fed will raise rate again in 2017
Sentiment: Indicators of investor psychology show optimism excessive
Strongest Sectors: Financials remain near top in relative strength - long-term bullish indicator for stocks
Weekly Market Notes for October 8, 2018Sarah Cuddy
- The stock market hit new highs after a revised trade deal between the US, Mexico, and Canada, but gains were capped by a rise in interest rates that sent stocks lower. Unemployment is at a 50-year low and economic indicators are strong, putting pressure on the Federal Reserve to continue raising interest rates. Third quarter earnings reports will begin this week and are expected to show 17% growth for S&P 500 companies. However, rising costs could threaten profit margins going forward. Investors are advised to focus on the health care and industrial sectors. Technical indicators suggest the market may be due for a pullback until breadth improves and pessimism rises.
The document provides a quarterly commentary and market observations from Macinv. In the first quarter, skepticism remained among investors but market sell-offs were less dramatic than previous years. Government policies are adjusting to stabilize fiscal situations. US GDP is expected to grow 2-2.5% in 2013. The Fed will continue quantitative easing and low interest rates. Key components of the US economy like home and auto sales showed growth in the first quarter. Macinv's portfolio performed well led by coal, transportation, and healthcare stocks. Natural Resource Partners and Norfolk Southern were top performers while CenturyLink underperformed after cutting its dividend.
RFG is a food retailer headquartered in Gold Coast, QLD that operates franchises across Australia and internationally. It has pursued aggressive growth through acquisitions, most recently acquiring Hudson Pacific, which will provide inventory supply to franchises and create a vertical supply chain. The report forecasts RFG's revenue to increase 50% due to Hudson, though increased operating costs are expected to offset profit growth in the near term. The share price is recommended to be a hold.
Retail Food Group - Analysis Report - Group 5Giang Nguyen
Retail Food Group (RFG) operates food franchises and company-owned stores in Australia, New Zealand, and Asia. While macroeconomic factors present challenges, RFG has maintained profitability through market share gains using strategic acquisitions and initiatives. Financially, RFG has enjoyed growth since acquiring Esquire Coffee in 2011. However, two major restructuring projects in 2014 may impact results that year. The report recommends holding the stock until the success of these projects is clear.
Weekly Market Notes for October 29, 2018Sarah Cuddy
- The major US stock indexes fell nearly 4% last week as rising interest rates, tariffs, and mixed corporate earnings continued to weigh on markets.
- Defensive sectors like utilities, consumer staples, and healthcare have been market leaders, but leadership may shift to materials, consumer discretionary, and technology if a market bottom is identified.
- Economic data shows continued US growth in the third quarter of 3.5%, but inflation pressures have subsided. The Fed is expected to raise rates again in December.
The document provides a research report from Krause Fund recommending Alcoa Inc. (NYSE: AA) as a strong buy. It summarizes Alcoa's business operations, current stock performance, financial ratios, and provides an analysis of key economic indicators and how they may impact Alcoa's future performance. The analysts initiate coverage with a buy rating and $18-20 price target due to Alcoa's shift toward more profitable downstream products, potential for market share gains, and expectations that recent restructuring efforts will allow it to execute on goals leading to long term share gains.
Duff & Phelps' Capital Markets Insights - Spring 2018 report states that leveraging costs and structures showed signs of increasing volatility in the first quarter of 2018, as markets reacted to rising economic growth, inflation concerns and trade tensions. Read the report for more detail.
Capital Markets Industry Insights - Fall 2016Duff & Phelps
Middle-market issuers were greeted by strong demand this quarter from mainstream credit sources as well as those seeking higher degrees of risk and return. Macroeconomic fundamentals continued to improve, though the focus remained on monetary policy. With an increasingly stark dichotomy of views at the Federal Reserve, volatility persisted in anticipation of clearer guidance on the pace and timing of rate hikes.
Summary
Economy: Housing rebounds –starts
increase for first time in four months – Building
permits climb the most since fourth quarter
2015; Conference Board’s Leading Economic
Index climbs most since December
Fed Policy: Policy committee meets July 25-
26 – no change expected in interest rates
Sentiment: Indicators of investor psychology
show optimism ticking up last week
Strongest Sectors: Financials, tech,
materials, industrials and health care
Borrowing costs for middle-market debt issuers generally declined during the third quarter, despite a modest increase in leverage levels and little change in benchmark rates. The Fed, as expected, left benchmark interest rates unchanged in the third quarter, but did announce a program to gradually reduce its balance sheet from $4.5 trillion (a result of recessionary quantitative easing) to $3 trillion over the next three years. Thus, the prevailing combination of low borrowing costs, high leveragability and a generally benign default rate outlook, presents an attractive backdrop for issuance. This "perfect storm" of market conditions provides a compelling (albeit narrowing) window for middle-market issuers.
The stock market broke a two-week losing streak last week, with the S&P 500 gaining 1.5%. Recent economic data points to continued strong GDP growth of around 3% annually. June jobs numbers were better than expected and the unemployment rate remains low. While some indicators show defensive sectors gaining and market breadth narrowing, overall economic strength supports the stock market, though volatility may increase in the summer due to mid-term elections.
Economic and Financial Analysis of Real Estate / REIT Industry (2014 Class Pr...Alexander M. Stearns
In April 2014, I evaluated the economic and real estate industry conditions and compared the merits of 4 real estate investment trust (REIT) securities through business life cycles, key financials, and DuPont analysis. Attached is a 14p. sample of the 40p. report.
The document provides an overview and analysis of capital markets activity in the summer of 2017. Some key points:
- Middle-market loan and debt issuance was robust, helped by strong M&A activity and refinancing. Leverage multiples increased.
- The Federal Reserve raised interest rates again but longer-term bond yields declined, reflecting moderating growth expectations.
- Corporate borrowing and profits remained strong despite political uncertainty. Near-term conditions remained favorable for middle-market issuers seeking financing.
The MNI Russia Consumer Indicator fell 5.4% in March to its lowest level since the survey began in 2013, as concerns over household finances, short-term business conditions, and spending declined sharply due to worries over Russia's actions in Ukraine. Current personal finances reached a series low while expectations for business conditions in one year also fell sharply. Overall consumer confidence in Russia has dropped more than 10% since the start of 2014.
- The major US stock indices declined last week in response to President Trump's announcement of tariffs on steel and aluminum imports. Investors are concerned about higher costs being passed onto consumers.
- Economic growth and employment remain strong, but investors are dealing with uncertainty around trade policy and interest rates. The Fed expects three rate hikes in 2018 with a potential for a fourth.
- For the stock market decline to be considered a correction, analysts want to see improvements in market breadth indicators and investor sentiment gauges. Most measures of sentiment currently show neutral or bearish views.
Weekly Market Notes for November 12, 2018Sarah Cuddy
The stock market gained over the past two weeks following the midterm elections. However, ongoing risks like rising interest rates and trade tensions could lead to increased volatility. Defensive sectors like healthcare and consumer staples are recommended for investors. Most market breadth indicators remain weak, suggesting upside may be limited without signs of broader participation. Historically, leadership shifts to cyclical and small cap stocks after elections, but currently defensive sectors show stronger relative strength.
Weekly Market Notes for November 19, 2018Sarah Cuddy
- The stock market broke a two-week winning streak last week, declining nearly 2%, as concerns remain about rising interest rates, trade issues, and slowing global growth.
- Defensive sectors like utilities and consumer staples have outperformed recently. Analysts recommend maintaining a cautious approach given technical indicators showing market downtrends.
- The document provides an overview of recent market performance and factors, along with recommendations to remain cautious given ongoing uncertainties.
Weekly Market Notes for August 20, 2018Sarah Cuddy
Continued strength in corporate earnings supports further stock market gains, but mixed technical indicators and a historically weak seasonal period ahead suggest taking a cautious approach in the third quarter. While leading economic indicators point to sustained long-term growth, a decline in consumer confidence and deteriorating housing trends suggest that economic growth could slow. Defensive sectors like consumer staples and utilities have shown relative strength and are recommended for diversification as markets move deeper into the third quarter.
Summary
Economy: Housing Affordability Index drops
to lowest level in ten months – rising home
prices offset lower mortgage rates; Bloomberg
Consumer Comfort Index down for first time in
four weeks; jobless claims plunge, close to 44-
year low
Fed Policy: FOMC meets this week with rate
hike near certain
Sentiment: Demand for puts suddenly drops;
VIX hits two-decade low
Strongest Sectors: Materials, financials and
health care climbing in relative strength
Summary
Economy: Industrial Production flat in May – up 2.2% year-over-year -- best since 2015; Regional Fed data points higher – Philly Index trending higher while NY Manufacturing Index jumps to the highest level since 2014
Fed Policy: Fed raised rates for the second time this year and the fourth hike in the cycle -- indicating one more rate hike before year end
Sentiment: Indicators of investor psychology show optimism but short of levels considered excessive
Strongest Sectors: Health care and financials and utilities move into top RS rankings
Stocks are facing resistance as breadth trends remain challenging, but investors are growing more optimistic about earnings. Rising commodity prices could pressure profit margins and surge in gasoline prices may weigh on consumer spending and economic growth. Bond yields are moving higher again as inflation concerns rise, which could lead to accelerated pace of rate hikes by the Fed. Sentiment indicators show mixed signals with some turning more bullish.
Stronger GDP Data Suggests Resilient Economy
Summary
Economy: Second-quarter GDP improves to
2.6% assisted by increase in consumer
spending and export growth
Fed Policy: Yellen leaves rates unchanged/
suggests October start to portfolio reduction
Sentiment: Indicators of investor psychology
show leap in optimism
Strongest Sectors: Financials, tech,
materials and industrials
- The stock market ended marginally lower for the second week in a row, but recovered from early losses as inflation remained low.
- Investor skepticism has improved the potential for a December stock market rally as liquidity builds on the sidelines. Sentiment surveys show pessimism rising among individual investors.
- While interest rates are rising, they remain below economic growth rates and the expected December rate hike has been telegraphed, so it is not expected to negatively impact stocks.
- The US stock market recently experienced a 10% correction from its January high, which is a normal occurrence happening every 18 months. Rising interest rates, inflation fears, and expectations of more aggressive Fed rate hikes contributed to the sharp drop.
- Fundamentally, economic growth remains robust with few signs inflation will return to 1970s levels. Technically, sentiment indicators show stocks are oversold and investor pessimism has increased, which is viewed as a positive signal.
- For the correction to be considered over, the author wants to see two sessions in the coming weeks where upside volume exceeds downside volume by a ratio of 10 to 1, which would indicate downside momentum is breaking.
The document provides a weekly market update summarizing recent economic data and trends in the US. It reports that while the Conference Board's Leading Economic Index declined for the second straight month, the index does not signal a significant recession risk and modest economic expansion is expected through early 2016. Industrial production increased strongly in January, exceeding estimates. Core inflation saw its largest monthly increase since 2011. Housing starts declined slightly in January from the previous month.
Mid-Week Market News for December 6, 2018Sarah Cuddy
- Stock market volatility remains high as the S&P 500 retests recent lows, though sentiment surveys show increased optimism among investors this week.
- The number of stocks making new 52-week lows has surpassed levels from earlier this year, indicating deteriorating market breadth.
- It is still uncertain if a bottom has been established, but rallies in stock prices and media stories predicting no Santa Claus rally could help stabilize markets in the short-term ahead of the next FOMC meeting later this month.
Summary
Economy: Economic data mixed - ISM Non-Manufacturing Index falls to lowest level of the year; July jobs data stronger than forecast
Fed Policy: G-20 inflation falls to lowest level since 2009; reduces odds of rate hike in fourth quarter
Sentiment: Indicators of investor psychology show optimism excessive
Strongest Sectors: Utilities, health care and telecom gaining in relative strength
Summary
Economy: Upside surprises = June Jobs Report strong; ISM Manufacturing and non-manufacturing indices tick up; trade deficit narrows
Fed Policy: Yellen points to potential September drawdown in balance sheet
Sentiment: Indicators of investor psychology show optimism but short of levels considered excessive
Strongest Sectors: Those most closely tied to the economy; industrials, financials and material sectors exhibiting strongest RS
- Stocks came under renewed pressure this week as volatility remained elevated. Year-to-date gains have been erased and major stock indexes have moved towards or through their October lows.
- Sentiment indicators show rising investor pessimism, with bulls falling and bears rising, reflecting the most pessimism since early 2016. This emerging pessimism could allow for meaningful lows to be made in the stock market.
- While latent investor optimism has prevented panic selling so far, evidence that pessimism is increasing may lead to further volatility but also provides an environment where stock prices can find a bottom.
Last week saw broad weakness in US equities and higher yields for global sovereign bonds. The dollar strengthened due to increased expectations of a December Fed rate hike, pressuring gold and bonds which had seen speculative long positions. Economic data was mixed with a stronger auto sales figure but weaker employment growth. Outside the US, emerging market stocks and bonds outperformed despite dollar strength. Going forward, analysts expect the sixth straight quarter of declining corporate profits in the US.
LBS Asset Allocation August Update - July 28, 2017Mark MacIsaac
Global economic data continues to show strong growth, but signs point to a peak in momentum. While US and Eurozone manufacturing surveys weakened, emerging market equities continue outperforming. Key indicators like flattening yield curves and disconnect between commodities and the US dollar suggest growth is likely decelerating. The document recommends slightly increasing exposure to emerging market equities and reducing underweight of other developed markets. It also recommends overweighting health care in the US and financials in Canada.
- Major stock market indexes rose between 2.75-3.93% over the past week, but remain down between 5-16% over the past year. Commodity prices like oil and gold also declined since last year.
- Economic data released in the coming week will provide insights into consumer confidence, durable goods orders, GDP growth, and consumer sentiment.
- The Conference Board's leading economic index declined for the second straight month but does not signal a significant recession risk in early 2016, while industrial production rose more than expected in January.
- Major stock market indexes rose between 2.75-3.93% over the past week, but remain down between 5-16% over the past year. Commodity prices like oil and gold also declined since last year.
- Upcoming key U.S. economic data releases include consumer confidence on February 23, durable goods orders on February 25, fourth quarter GDP on February 26, and consumer sentiment on February 26.
- The Conference Board's leading economic index declined for the second straight month but does not signal a significant recession risk and growth is expected to continue through early 2016. U.S. industrial production rose more than expected in January.
This document provides a weekly market summary for the week ending February 22, 2019. It summarizes the performance of major US indexes such as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, which posted modest gains for the week. It also provides the latest data on economic indicators such as new orders for durable goods, existing home sales, unemployment claims, and upcoming key economic reports.
Monthly Market Risk Update: February 2023 [SlideShare]Commonwealth
The Independent Market Observer's monthly update reported continued recession and market risks in February 2023. Several key economic indicators signaled a potential recession, including an inverted yield curve for the past four months. Market valuations and margin debt also declined for a full year, suggesting drawdowns may be imminent. While markets started 2023 positively, inflation and interest rates pose ongoing risks to the economic expansion and corporate earnings could face further pressure. Overall, the path back to normal economic and market conditions is likely to see setbacks along the way.
Similar to Weekly Market Notes for January 7, 2019 (20)
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Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
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"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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Tdasx: Unveiling the Trillion-Dollar Potential of Bitcoin DeFi
Weekly Market Notes for January 7, 2019
1. Bruce Bittles
Chief Investment Strategist
bbittles@rwbaird.com
941-906-2830
William Delwiche, CMT, CFA
Investment Strategist
wdelwiche@rwbaird.com
414-298-7802
Please refer to Appendix – Important Disclosures
Stock Market
The decline in stock prices in the fourth quarter was largely due to concerns that the
U.S. economy was headed toward recession triggered by an overly aggressive
Federal Reserve monetary policy. This notion was quickly set aside by a remarkably
strong December jobs report on Friday accompanied by comments from Fed Chief
Powell stating that the labor market strength in December as well as upward
revisions in the October and November hiring and steady wage growth should calm
fears regarding an economic slowdown. The Fed chief signaled that he would be
more “patient” with monetary policy suggesting the Fed may pause its rate hike
campaign, which is likely to provide additional room on the upside for stocks. This
also set in motion a rally in bond yields and oil prices that had investors worried
about a business slowdown as oil prices fell 41% since October. Nevertheless, it
would be premature based on a single month’s data, to consider that the volatility in
the stock market will disappear and that a sustained new uptrend has begun.
Fourth-quarter earnings reports will soon be forthcoming accompanied by important
guidance figures for 2019. In December, analysts reduced their profit estimates on more than half the companies in the S&P 500.
According to FactSet, expectations are that earnings will grow 7.8% in 2019, down from forecasts made in September of 10.1%.
Additionally, uncertainty lingers over trade talks with China as does the impact of the slowdown in global growth on the domestic
economy. We recommend focusing on the strongest sectors within the S&P 500, all of which have defensive characteristics. The top
five sectors in relative strength include utilities, REITs, consumer staples, health care and communication services.
The technical condition of the stock market has improved significantly suggesting further upside progress is likely. The strong downside
momentum that plagued the stock market since October has been broken. We now have had two sessions (December 26 and January
4) where upside volume has overwhelmed downside momentum by a ratio of 10 to 1 or more. Investor sentiment indicators show a
significant level of pessimism for stocks that from a contrary opinion standpoint suggests further gains in stock prices are likely. The
latest report from Investors Intelligence, which tracks the opinion of Wall Street letter writers, showed a significant drop in bulls last
week and the highest level of bears since the end of the market correction in February 2016. Additionally, the Ned Davis Daily Trading
Sentiment Composite recently showed the most pessimism since the 2011 bear market bottom. Further evidence of excess pessimism
is the fact that individual investors pulled a record $75.5 billion from equity mutual funds and ETFs in December. Using contrary
opinion, we anticipate a counter-trend rally in the first quarter, the strength and potential of the rally dependent on a significant
expansion of stock market breadth. On this front, we are encouraged last week by the fact that the Russell 2000 and the NYSE
Composite Index, that includes more than 2000 issues, outperformed the S&P 500 and Dow Industrials by advancing 3.20% and 4.23%
respectively versus 1.60% for the Dow Industrials and 1.88% for the S&P 500 Index. Expansion in stock market breadth will be a
function of how well small- and mid-cap stocks rebound.
Summary
Economy: Economic data supports continuing
but slower growth in 2019. Leading indicators,
industrial production data and strong labor
markets suggest GDP growth at or above trend
(2.50%).
The focus for the coming months will be on the
Federal Reserve’s indication of a pause in rate
hikes as well as trade talks between the U.S.
and China set to begin next week.
Technically, significant improvement suggests
further upside progress; downside momentum
that plagued the market last year has been
broken.
Weekly Market Notes
January 7, 2019
Dow Industrials 23433
S&P 500 2531
Baird Market and Investment Strategy --
2. Weekly Market Notes
Robert W. Baird & Co. Page 2 of 5
Current Previous Indication
CBOE 10-Day Put/Call Ratio
Below 85% is bearish; Above 95% is bullish
117% 122% Bullish
CBOE 3-Day Equity Put/Call Ratio
Below 58% is bearish; Above 71% is bullish
66% 75% Neutral
VIX Volatility Index
Below 12 is bearish; Above 30 is bullish
21.3 28.4 Neutral
American Association of Individual Investors
Twice as many bulls as bears is bearish; 2X more bears than
bulls is bullish
Bulls:
Bears:
33.0%
43.0%
Bulls:
Bears:
32.0%
50.0%
Neutral
Investors Intelligence (Advisory Services)
55% bulls considered bearish/more than 35% bears is bullish
Bulls:
Bears:
29.9%
34.6%
Bulls:
Bears:
39.3%
21.4%
Bullish
National Assoc. of Active Investment Mgrs. (NAAIM)
Below 30% is bullish; Above 80% is bearish
59% 48% Neutral
Ned Davis Research Crowd Sentiment Poll Extreme Pessimism Extreme Pessimism Bullish
Ned Davis Research Daily Trading Sentiment Composite Pessimism Excessive Pessimism Excessive Bullish
RS Ranking RS
Current Previous Trend
Leaders: Electric Utilities; Gas Utilities; Independent Power Producers
Laggards:
Leaders: Health Care REITs; Residential REITs; Retail REITs
Laggards:
Leaders: Pharmaceuticals
Laggards:
Leaders: Integrated Telecommunications Services
Laggards: Publishing; Home Entertainment Software
Leaders: Food Retail; Hypermarkets & Super Centers; Soft Drinks;
Household Products
Laggards: Distillers & Vintners; Tobacco
Leaders: Consumer Electronics; Footwear; Restaurants; Automotive Retail
Laggards: Auto Parts & Equipment; Motorcycle Manufacturers; Leisure
Products; Apparel, Acessories & Luxury Goods; Computer &
Electronics Retail
Leaders: Metal & Glass Containers
Laggards: Commodity Chemicals; Paper Packaging; Steel
Leaders:
Laggards: Investment Banking & Brokerage
Leaders: Systems Software
Laggards: Technology Hardware, Storage & Peripherals
Leaders: Agricultural & Farm Machinery; Environmental & Facility
Services
Laggards: Construction & Engineering; Air Freight & Logistics; Trucking
Leaders:
Laggards: Oil & Gas Drilling; Oil & Gas Equipment & Services; Oil & Gas
Exploration & Production
** Denotes Current Relative Strength-Based Overweight Sectors
Energy 11 11
Materials 7 7 +
Consumer
Discretionary
6 6
Financials 8 9
Industrials 10 10
Communication
Services
4 ** 5
Consumer Staples 5 ** 4
Real Estate 2 ** 3
Health Care 3 ** 2
Sub-Industry Detail
Utilities 1 ** 1
Information
Technology
8 -9
3. Weekly Market Notes
Robert W. Baird & Co. Page 3 of 5
Appendix – Important Disclosures and Analyst Certification
This is not a complete analysis of every material fact regarding any company, industry or security. The
opinions expressed here reflect our judgment at this date and are subject to change. The information
has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy.
ADDITIONAL INFORMATION ON COMPANIES MENTIONED HEREIN IS AVAILABLE UPON
REQUEST
The Dow Jones Industrial Average, S&P 500, S&P 400 and Russell 2000 are unmanaged common
stock indices used to measure and report performance of various sectors of the stock market; direct
investment in indices is not available. Baird is exempt from the requirement to hold an Australian
financial services license. Baird is regulated by the United States Securities and Exchange
Commission, FINRA, and various other self-regulatory organizations and those laws and regulations
may differ from Australian laws. This report has been prepared in accordance with the laws and
regulations governing United States broker-dealers and not Australian laws.
Other Disclosures
The information and rating included in this report represent the research analyst’s views based on a
time horizon of 12 months, as described above, unless otherwise stated. In our standard company-
specific research reports, the subject company may be designated as a “Fresh Pick”, representing that
the research analyst believes the company to be a high-conviction investment idea based on a
subjective review of one or more fundamental or quantitative factors until an expiration date specified
by the analyst but not to exceed nine months. The Fresh Pick designation and specified expiration
date will be displayed in standard company-specific research reports on the company until the
occurrence of the expiration date or such time as the analyst removes the Fresh Pick designation from
the company in a subsequent, standard company-specific research report. The research analyst(s)
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particular investment perspectives or trading strategies based primarily on the analyst’s understanding
of the individual client’s objectives. These perspectives or trading strategies generally are responsive
to client inquiries and based on criteria the research analyst considers relevant to the client. As such,
these perspectives and strategies may differ from the research analyst’s views contained in this report.
Baird and/or its affiliates may provide to certain clients additional or research supplemental products or
services, such as outlooks, commentaries and other detailed analyses, which focus on covered stocks,
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4. Weekly Market Notes
Robert W. Baird & Co. Page 4 of 5
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5. Weekly Market Notes
Robert W. Baird & Co. Page 5 of 5
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