Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Trump vs Xi: Tiger vs Dragon?
(1) China more vulnerable in trade war with US. (2) Xi aspires to Mao’s power. (3) Xi’s “new era” off to a bad start. (4) Deng nostalgia. (5) US targets Xi’s “Made in China 2025.” (6) Bad medicine. (7) Stress cracks in China’s economy. (8) Chinese stocks coming under pressure. (9) Birth dearth. (10) Banking on more credit.
Big Revisions, Small Net-Net
(1) An old joke that remains relevant today. (2) Lots of offsetting benchmark revisions in real GDP that don’t add up to much. (3) Shift to more first-half annual growth and less second-half growth. (4) BEA concedes that seasonally adjusting quarterly real GDP is hard to do. (5) Revisions give real tech spending and real imports (like cell phones) a boost. (6) Personal saving data revised up sharply. (7) Lots of components of personal income revised up sharply.
Trump’s World
(1) No place like home. (2) Stay Home isn’t just about trade war; tax cuts also giving the US an edge. (3) The strong dollar isn’t just about trade war but also central bank policies—i.e., Fed normalizing while ECB and BOJ policies remain abnormally easy. (4) Copper price isn’t just about strong dollar but also reflects some global weakness. (5) Forward earnings of US MSCI outpacing rest of the world since start of current bull market. (6) So far this year, cyclical stocks beating interest-rate-sensitive ones. (7) SmallCap outperformance isn’t just about less exposure to trade war.
Robot Advisors & the Magic Kingdom
(1) New, new thing in passive asset management, robo-advisors. (2) Assets under management growing fast. (3) AI-enabled investment allocation also enables low to no minimums, low to no fees. (4) Big traditional players: “Can’t beat ’em, join ’em.” (5) Robo segment hopping with new mergers, partnerships, and offerings. (6) Flavor of the month or here to stay? (7) Let the investor beware: Know what’s under your algorithms’ hood. (8) Vacation-happy consumers shoring up hotel industry stats. (9) Beneficiaries include Marriott and Disney. (10) Even so, S&P 500 Hotel, Resorts & Cruise Lines stock price index is down ytd-undervalued?
Tuning Out the Noise
(1) Two remarkable back-to-back quarters for earnings. (2) Two more to go. (3) Getting closer to our year-end S&P 500 target of 3100. (4) Three happy earnings hooks. (5) Forward earnings converging to higher 2019 estimates. (6) Lots of earnings power in S&P 500 sectors. (7) Jamie Dimon is bearish on bonds. (8) Bears warn that corporate pensions’ tax-related bond-buying will end in September. (9) Inflationary pressures are mounting, but broad inflation measures remain subdued. (10) US bond yield tethered to German and Japanese yields. (11) Noise about escalating trade war weighing on global manufacturing.
Slowing? Not So Fast!
(1) Watch our first video podcast. (2) The pre-tariffs scramble to export boosted Q2 real GDP. (3) Y/y growth rates in real GDP, along with consumer and capital spending, nothing out of the ordinary. (4) Signs of weakness may be misleading. (5) Pay little attention to surprise index and NM-PMI. (6) Minimalist Millennials may be depressing demand for homes and autos. (7) Haven’t run out of human workers yet, while rent-a-robot may be the next new, new thing.
Babies & Help Wanted
(1) Demographic collaborators. (2) From Generation Z to Generation Zero. (3) Marriage continues to lose market share. (4) Singles outnumbering married couples. (5) Getting married later in life. (6) Birth dearth getting worse. (7) Signs of life in household formation and homeownership. (8) Record full-time employment. (9) Payroll employment revisions series is timely business-cycle indicator, which is upbeat currently. (10) Quitters at record high, yet wage inflation remains subdued. (11) Some Millennial quitters doing so to see the world rather than to get a better job with more pay. (12) Movie review: “Three Identical Strangers” (+ + +).
Artificial vs Material Worlds
(1) AI will power the next Industrial Revolution, or kill us all. (2) Fritz Lang saw it coming in 1927. (3) Racist robots. (4) Algos have a “black box” problem. (5) From virtual to fake reality. (6) Weaponized drones and Terminators turning war into a video game. (7) Kissinger says the end is near for the Enlightenment. (8) FANG workers of the world unite! (9) High fives in China. (10) Materials sector has winners and losers. (11) More on prime-working-age males: vets and ex-cons.
New York, Tokyo, and Mumbai
(1) Earnings hotter than expected. (2) Forward revenues and earnings of S&P 500/400/600 rising to fresh record highs at end of July. (3) Lots of good reasons to be bearish on bonds, yet yield of 10-year Treasury remains calm just under 3.00%. (4) US bond yield is tethered to near-zero yields in Germany and Japan. (5) Trade uncertainties depressing Germany. (6) BOJ keeps priming inflation pump, which continues to run dry. (7) Inflation remains relatively subdued in US. (8) One person’s debt is another’s asset. (9) A guided tour of the latest developments in India.
Growth & Inflation in Trump World
(1) Is there an internal contradiction in Trump’s agenda? (2) Over-the-top growth. (3) Donald Trump vs. Adam Smith. (4) Is Trump a mercantilist or not? (5) Donald Trump vs. Charles Koch. (6) Trump’s ceasefire with Europe. (7) Exports boosted by beating the tariffs. (8) Strong capital spending. (9) Five regional business surveys showing lots of strength. (10) Trump’s tax cuts and tariffs stress-testing our low-inflation scenario. (11) Record profit margins may be inflationary shock-absorber. (12) Regional, national, and Beige Book surveys all seeing more cost pressures.
Why Work?
(1) Despite not much slack in labor market, wage inflation likely to remain subdued. (2) A depressing trend: Men without work. (3) Baby Boomers are no longer “prime.” (4) Lots of prime-working-age male dropouts are disabled, ill, and/or on pain meds. (5) Government welfare programs providing incentive not to work. (6) As the proverb states: “Idle hands are the devil's workshop.” (7) Powell’s justification for gradual tightening: He is hoping more adult men drop back into labor force. (8) No 9-5 jobs for them: Wi-Fi allows Millennials to combine less work with more play. (9) Movie review: “Mission: Impossible—Fallout” (+).
Industrials Under Some Duress
(1) Cost pressures mounting for Industrial companies. (2) Will they cut costs, boost prices, or both? (3) Labor shortages in Europe too. (4) Tariffs are the new costs on top of labor and commodity costs. (5) Analysts may be too optimistic about the sector. (6) IMO 2020 rules will force commercial ships to run on low-sulfur fuel, rather than on the stuff at the bottom of the barrel. (7) Higher fuel cost for maritime shipping companies. (8) Refiners scrambling to meet prospective demand. (9) Ford wants you to spend less time driving your car, while AT&T wants you to watch more HBO in your car.
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” (+).