Its Easter Sunday and hope all are having a good long weekend break here.
Below are a selection of purely macro economic and equity valuation reports along with considered comment from your truly.
Overall its much of the same old same old. An slow improving economic picture in terms of raw economic numbers but no signs of a self sustaining recovery and plenty of data points showing that the improvement has been created at a cost which will be felt at a future date.
First up here a run through of some of the macro global cross currents:
And here WF’s weekly:
And here Barcap:
And here MS with their global macro mm view.
And here Danske with a global view:
Here Barcap on Japan:
And here DB on the uk’s large current acc deficit:
Here on KF on the miracle & perpetual wealth creation machine ie the UK housing market:
Here hsbc on the em issues..
Here ABN with a brighter EM view:
And here Commerz with a macro econ chart pack:
Here a WTO report on world trade
And here the Yardeni macro chart pack:
Each chart needs a comment but i don’t have sufficient time to run through each I’m afraid. The US manufacturing index is doing well but why? Look at the credit markets inc ABS market and this explains why there is endless credit for the boom in aircraft and autos. The recent expansion in retail continues to be fed by the fed’s zero interest rate policy so consumer’s run down their savings once again. These trends are damaging and are not self sustaining.
Here Facset on the latest US corporate earnings. Note these earning statements are relative to prior expectations. Prior participant expectations 6 months ago were for strong earnings growth in this quarter. As we got closer to the earnings statements, of course, the expectations fell and fell into negative territory note for many analysts. As Facset summarize this quarter “could be the first decrease in earnings since Q3 2012”.
Note as well how skewed some of the data can be by just one component of some equity indexes.
“Telecom Services sector is predicted to have the highest earnings growth rate at 26.1%”. Facset
But, “if Verizon is excluded, the earnings growth rate for the sector would drop to -0.1%. Facset
Here their earnings latest:
And here the shiller pe on the current US market:
Corporate profits have been rising as a share of gdp whilst revenues have flat lined and capex and staff costs have fallen. Tax revenues from corporates are no where near their 2008 levels whereas profits are much higher. At some point soon i suggest the US government will increase corporate taxes to correct this corporate windfall. The effect on equity prices would likely be dramatic. Consider the Shiller mean reversion move together with a reduction in corporate earnings due to a mean reversion for the corporate tax burden. The combination would be disastrous for US equities. Make no mistake this is not a forecast but simply a risk observation/warning.
Equities have held up in spite of the weakening macro economic surprises.
Relative to the Sp500 index some sectors have nonetheless badly under performed.
Tomorrow we turn to the technical charts & indicators on equities and commodity markets.