Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Ahead & Behind Schedule
(1) Same old story. (2) S&P 500 forward revenues still soaring. (3) S&P 500 forward earnings jumps to $170 per share, six months ahead of schedule. (4) An 18 P/E now would put S&P 500 at 3100! (5) Happy hook in Q2 earnings. (6) Four S&P 500 sectors with forward revenues ascending in record-high territory. (7) Smaller is beautiful thanks to less exposure to trade war and better revenues and earnings growth. (8) Contrary to urban legend, real wages have been on a uptrend since mid-1990s. (9) Baby Boomers who refuse to retire may be keeping a lid on overall wage measure.
The Big Boost
(1) Tax receipts dropping relative to GDP. (2) Supply-siders may take credit for rising individual income tax receipts despite (or because of) tax cuts. (3) Consumers saving less. (4) TCJA giving big boost to profits. (5) Weekly fundamental indicators remain bullish for stocks. (6) Forward earnings at another record high. (7) What’s better (or worse): Inverting yield curve or rising bond yield? (8) 2-year Treasury yield closely tracking 12-month forward federal funds futures. (9) Rumored change in BOJ policy putting upward pressure on bond yield, confirming our globalized bond market thesis. (10) A really great review of my book in CFA Institute’s Financial Analysts Journal.
Color War
(1) Green light: New record highs for LEI and CEI. (2) Yield curve spread in LEI remains solidly positive. (3) Amber light: Weak payroll employment growth-from slow recovery to labor shortages. (4) Fed’s Beige Book showing moderate wage gains despite tight labor supply. (5) “Shortage” mentioned 26 times. (6) Relaxing drug testing and training ex-cons. (7) Black & blue: The trade war morphs into currency war. (8) “Tariff” mentioned 31 times. (9) South of the Border: Incoming President ALMO not as radical as feared, so far. (10) Movie review: The Equalizer 2 (+ +).
Fancy Fintech & Punxsutawney Powell
(1) So far, Q2 earnings looking good for Financials. (2) Talking about Fintech on earnings calls. (3) Banking on apps. (4) Goldman wants us to bank with Marcus. (5) BofA wants us to talk to Erica. (6) PNC using Fintech to go national. (7) A preview of 2019 earnings. (8) Fed Chairman Powell’s 10 talking points.
Happy World Revenues
(1) Staying ahead of the pack in the technology race. (2) More frequent mentions of trade concerns in Fed’s Beige Books since early this year. (3) Trade also mentioned as a worry in June ISM report, yet M-PMI remained strong. (4) Same old story: Industry analysts raising estimates for 2018 and 2019 S&P 500 revenues. (5) Outperforming SmallCaps: Not just more immune to trade; revenues and earnings outlooks are strong too. (6) US leading MSCI forward revenues recovery since early 2016. (7) EMU and Japan have been catching up since 2017, but are still lagging.
Happy Sales
(1) Retail sales boosted by solid employment gains and tax cuts. (2) GDPNow now at 4.5%. (3) Business sales jump to record high, remaining bullish for S&P 500 revenues. (4) No sign of supply-chain worries in real inventory-to-sales (I/S) ratios. (5) Remarkable decline in retailing I/S ratio attributable to Amazon. (6) Big divergence between real GDP outlook at the Fed and the White House. (7) Kudlow crosses the line. (8) Will tighter monetary policy offset stimulative fiscal policy? (9) Powell skirts trade policy issues. (10) Known unknown: Fiscal multiplier in bad vs good times.
The Kindness of Strangers
(1) Blanche DuBois vs Donald Trump. (2) Stagflation debate: Will tariffs depress growth and boost inflation? (3) Bond yields remain eerily subdued. (4) So do inflationary expectations implied by TIPS. (5) Dr. Copper bearish on China. (6) Fed data show foreigners buying lots of US bonds. (7) Weakening yuan could offset inflationary consequences of Trump’s tariff on Chinese goods. (8) Fed, not trade, is driving the US stock market, as S&P 500 cyclicals beating interest-rate sensitive ytd.
Pills & Chips
(1) Worldwide semiconductor sales at record high. (2) Trade war over “Made in China 2025” spells trouble for chip equipment makers. (3) China could short-circuit M&A. (4) Controlling drug prices with presidential tweets. (5) SmidCap Health Care stocks in feverish rally mode as investors seek trade-immune equities. (6) M&A driving Health Care Equipment prices up. (7) Good prognosis for Health Care services. (8) Managing to cut costs. (9) Amazon is popping pills.
Is the Yield Curve Bearish for Stocks?
(1) Google Trends shows flattening “yield curve” is trending higher. (2) 10-year minus 2-year Treasury yield spread close to zero. (3) Hard to argue with success. (4) Yield curve spread is just one of 10 leading indicators. (5) Credit cycle has yet to enter crunch phase. (6) The bond market has gone global, and near-zero bond yields in Germany and Japan are making US bonds awfully attractive. (7) The Bond Vigilantes have been kept in check by the major central banks. (8) Another Fed Model: This one tracks a near-term yield spread, which is showing just a 14% chance of recession. (9) Why are S&P 500 revenue estimates so strong? (10) A very brief primer on quantum computers.
Trade Wall of Worry
(1) Channeling the chart of the S&P 500. (2) Market top or the pause that refreshes? (3) Climbing a trade wall of worry. (4) MEGA = Making Earnings Great Again. (5) Leading the Q2 earnings pack are Energy, Materials, IT, and Financials. (6) Analysts remarkably bullish on 2018 and 2019 S&P 500 revenues. (7) Fed officials see downside risks (flattening yield curve, escalating protectionism, European discord, and EM turmoil) and upside ones (fiscal stimulus and overheating economy). (8) Fed study questions usefulness of yield curve as recession warning signal. (9) No recession signal in “near-term forward spread.”
Somebody Had Better Blink Soon
(1) Trump’s dogs of war are no longer just barking. They are biting. (2) Trump considering tariff on all Chinese imports. (3) Hedge clause (“barring a trade war”) is no longer a hypothetical threat. (4) Markets are saying China has more to lose than US. (5) Dr. Copper raising odds of recession in China. (6) US imports from China are three times greater than US exports to China. (7) Emerging market economies suffer collateral damage. (8) US yield curve reflects global flight to US quality. (9) Will Europeans blink on auto tariffs? (10) Is there method to Trump’s madness on trade? (11) Trucking index rose to record high in US during May. (12) Movie review: “Won’t You Be My Neighbor?” (+ + +).
Animal Spirits Update
The next Morning Briefing will be sent on Monday, July 9. (1) An upset victory upsets “The Resistance.” (2) Meanwhile, animal spirits remain spirited for the most part. (3) S&P 500 sectors’ performance driven more by bond yield than protectionism since Trump’s election win. (4) GDPNow back over 4.0%. (5) M-PMI remains upbeat. (6) M&A is also bullish for stocks. (7) Powell is even handed. (8) More on the corporate debt threat.
Buybacks, Inflation Targets, and CLOs
(1) Buybacks by the numbers and the sectors. (2) Buybacks explain overall market performance better than sector performance. (3) No contest: Stay Home beating Go Global since start of bull market. (4) Trade issues weighing on EU, China, and Mexico. (5) Strong dollar (attributable to Fed’s rate hikes and Trump’s “America First” campaign) is weighing on EMs. (6) Fed and ECB hit their inflation targets. Now what? (7) Should we worry about CLOs? (8) Movie review: “Sicario: Day of the Soldado” (+).
Auto Imports & DNA Storage
(1) Tariff message: Baby, you can’t drive my car. (2) US is world’s largest importer of cars. (3) US tariffs are low on cars but high on trucks. (4) US autos sold in Europe are mostly made in Europe. (5) Germany may be ready for a deal on autos. France, not so much. (6) Moody’s warning. (7) S&P 500 Autos remain in a ditch. (8) DNA: Nature’s hard drive set to blow away current data storage technology.
Grazing Bulls
(1) Buybacks booming. (2) A corporate finance model explaining buybacks. (3) S&P 500 buybacks + dividends = $6.9 trillion since start of bull run. (4) Beware of fake news on trade. (5) No sign of global slowdown in S&P 500 forward revenues. (6) Forward earnings at yet another record high. (7) Animal spirits remain animated. (8) Four regional Fed surveys upbeat in June. (9) CEOs remain upbeat. (10) Small business owners say best outlook for expansion on record. (11) Mirror, mirror on the wall: Is the US the fairest trader of them all? (12) Aluminum and steel tariffs aren’t negotiable since they are a matter of national security. (13) Not just about tariffs. (14) A correction on Google’s P/E.
Protectionist Fever
(1) Beach tug of war: Yardeni vs Clinton and Patterson. (2) Trump stoking protectionist fever. (3) Bullish for the dollar. (4) Bearish for commodity currencies. (5) Even the Stay Home stocks could be hurt by a trade war, but less so than Go Global ones. (6) Bond market sends conflicting signals on recession outlook. (7) Yield curve turning more bearish on economy, but credit quality spread isn’t. (8) Fed officials may have to taper monetary normalization if trade policy turns more abnormal. (9) FANGs grow by disrupting other business models, but could be ripe for profit-taking. (10) Lots of hot spots in US stock market, though protectionist fever could cause occasional chills.
Europe’s ‘Meltdown Pot’
(1) Niall nails it. (2) Hooray, Greece is fixed (maybe)! (3) Anti-immigration fervor spreading in Europe, with talk of formation of an “axis” to combat the problem. (4) Merkel’s coalition government could uncoalesce. (5) Closing up some borders. (6) The Bavarian connection. (7) Italy’s new populist government wants to give immigrants the boot. (8) Eurozone PMIs, production, and orders looking toppy. (9) Darker days ahead? (10) Movie: “Jurassic World: Fallen Kingdom” (- -).
Weighty Matters
(1) Dropping GE. (2) IT and Health Care have been earnings-share gainers. (3) Four earnings-share losers. (4) S&P 500 Telecom Services will morph into Communication Services after September 28. (5) Time to go shopping for REITs? (6) REITs are depressed, so largest buyers in the real estate industry are snapping them up. (7) Apple hires Oprah and other celebs to catch up with Netflix. (8) Red Bull is bullish on gamers.
Tit for Tat
(1) A chronology of the US-China trade dispute. (2) Some threats, a few concessions, and some tariffs. (3) Upping the ante. (4) Risk of public tiff over tariffs is global slowdown, or a recession if tiff leads to war. (5) Will the smoke clear, or is it the fog of war? (6) Seeking peace and quiet. (7) S&P 500/400/600 continue to send strong bullish signals, which are hard to hear over all the noise about protectionism. (8) Trump risks losing mid-term congressional elections to the “resistance” if he doesn’t resolve major trade disputes soon.
Mother of All Credit Bubbles?
(1) Imaginative bears. (2) Pearlstein’s dire prophecy for the “Buyback Economy.” (3) Credit bubbles tend to be followed by a crisis, then a contagion, and finally a recession-causing credit crunch. (4) Is corporate debt the epicenter of the next economic and financial disaster? (5) Debt ratios look relatively conservative actually. (6) Corporations have extended the maturities of their debt at record-low interest rates. (7) Buybacks + dividends = 100% of after-tax profits. So what? (8) Retained earnings and buybacks are tiny compared to cash flow from tax-sheltered capital consumption allowance. (9) Capital spending looks normal, not abnormally weak. (10) Corporate credits may be junkier, but don’t ignore vultures ready to scoop them up at distressed prices. They may be credit markets’ shock absorbers. (11) Melissa does some fact checking on a few of Pearlstein’s sources.
The Strange Case of Dr. Jekyll and Mr. Hyde
(1) Trump’s split personality driving stock investors bonkers. (2) Uptrend of monthly indicators suggests Q2 real GDP growth over 4.0%. (3) Jobless claims near record lows. (4) Boom-Bust Barometer at record highs. (5) Forward earnings still rising vertically to record highs. (6) Tariffs: From saber-rattling to shooting bullets. (7) Tariffs boosting prices of steel and washing machines. (8) Stocks holding up remarkably well thanks to earnings. (9) Bonds ignoring inflationary signals that may be mostly attributable to rising oil prices, which fell sharply on Friday. (10) The Fed is neither dovish nor hawkish. It is on course. (11) ECB is both hawkish and dovish. (12) BOJ is dovish. (13) Movie review: “Gotti” (- -).
Equilibrium Oil?
(1) Tug of war in the oil patch. (2) Miracle on oil: US producing a record 10.8 mbd. (3) OPEC meets next week as Saudis and Russians up output. (4) Venezuela is a mess, and Iran is facing renewed sanctions. (5) Tipping point for renewables. (6) Cheaper batteries. (7) That’s entertainment. (8) Tug of war between cost-push inflation and robots.
Growling Bears
(1) Out of hibernation. (2) S&P 500 200-dma remains on uptrend in record territory. (3) Setting the stage for new record highs, or a bear market? (4) Bad breadth comes and goes. (5) Sentiment isn’t too hot or too cold. (6) Broken records for forward revenues and earnings. (7) SmallCaps at record highs as investors come back home. (8) Small business owners ecstatic about their earnings. (9) Fewer complaining about taxes and government regulations. (10) Three growling bears.
Do US Budget Deficits Matter?
(1) Swelling deficits are baked in the cake. (2) How to avoid shutting down the government: Spend more! (3) US budget deficit goes from automatic stabilizer to late-expansion booster. (4) Social Security trust fund is an accounting fiction. (5) From surpluses to deficits as the Baby Boomers retire. (6) Lots of retiring old NILFs. (7) Fed’s balance-sheet tapering adding to supply of Treasuries. (8) A report full of mumbo-jumbo about a fake trust fund. (9) So why aren’t bond yields higher? (10) Don’t go with the flows.
Tuning Out the Noise
(1) The most bullish and bearish President ever. (2) S&P 500 cyclical sectors performing best ytd despite protectionism. (3) S&P 500 defensive sectors notch worst performance ytd because of rising bond yield. (4) SMidCaps outperforming LargeCaps on fears about global economic outlook. (5) Yet Dr. Copper may be turning more bullish on global economy. (6) Q1 data for nonfinancial corporations shows a 36% drop in effective tax rate. (7) A short users’ guide for the GDPNow model. (8) Mary Meeker’s excellent slide show.