Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
The Longest Expansion
(1) A short review of the supply-side religion. (2) The central dogma: Tax cuts pay for themselves. (3) Fact-based vs faith-based economics. (4) Some of the supply-side stimulus leaks out through the widening trade deficit. (5) Supply-side stimulus in a fully employed economy can increase net interest cost for the government. (6) Fed officials thinking out loud about fiscal policy stimulus. (7) Index of Coincident Economic Indicators shows economy still growing around 2.0%. (8) Yield curve is just one of 10 components of Index of Leading Economic Indicators. (9) No boom, no bust. (10) This expansion has a shot at the record books.
Lots of Commotion
(1) What’s worse: a flattening yield curve or rising bond yields? (2) By raising federal funds rate, Fed is signaling confidence in economy and storing up ammo to fight next recession. (3) The Fed is on top of the curve, neither behind nor ahead of it. (4) Bond yield target for rest of year: 3.00-3.50%. (5) Inflationary expectations rising along with oil and other commodity prices. (6) Despite flat US yield curve, no recession in global economy according to commodity prices. (7) No recession in credit quality spread or LEI. (8) German and Japanese bond yields remain near zero as ECB and BOJ balance sheets continue to swell. (9) Peak oil demand vs peak oil supply. (10) Remarkable strength in oil prices given soaring US and Canadian oil output. (11) Movie Review: “The Death of Stalin” (+ +).
Behavior Modification Empires
(1) Tech and Consumer Discretionary lead the pack ytd. (2) Latest relief rally includes interest-rate-sensitive sectors. (3) Flattening yield curve flattens Financials. (4) Zuckerberg has been in our Facebooks. (5) Loyalty prediction AI tools know who they can and cannot trust. (6) Self-breeding AI. (7) AI will be in the hands of the good, the bad, and the ugly soon. (8) Tech guru says that Google (motto: “Do no evil”) and Facebook (Like or not) have become mind-control vampires. (9) Time to require pay-to-play, instead of sell-my-privacy model. (10) Modern Monetary Theory says federal government budget deficits don’t matter until they do matter (when inflation makes a comeback).
Lots of Debt
(1) China’s engine running on bank loans. (2) No credit crunch for China as long as inflation remains subdued. (3) Chinese bank loans funded by Chinese depositors. (4) Less and less bang per yuan? (5) CBO projecting $1.2 trillion per year, on average, in federal budget deficit through 2028. (6) Public debt set to double again over next 10 years. (7) CBO not drinking supply-side Kool-Aid. (8) Interest paid by federal government set to triple over next 10 years. (9) Will tax cuts lift potential GDP’s growth rate? (10) Budget deficit may or may not matter when inflation is low, but will definitely matter if inflation rises.
More Ups Than Downs
(1) Retail sales is one of the three components of business sales. (2) Monthly business sales is a good leading indicator of S&P 500 revenues. (3) The revenues growth cycle may be peaking. (4) The Energy-led growth recession and recovery may have run their courses. (5) After exuberant upward revisions, analysts may be starting to curb their enthusiasm about revenues. (6) US PMIs remain upbeat on S&P 500 revenues growth. (7) GDPNow down to 1.9%. (8) Three explanations for why retail sales were so weak during Q1. (9) Online retail sales now at record 31.0% of GAFO sales.
Inflating Inflation
(1) The “fret level.” (2) Trade War Watch: Xi concedes a little, while Trump has second thoughts about TPP. (3) Trump channeling Reagan rather than Hoover on trade. (4) Our fearless leader is impetuous on trade as on other matters. (5) Next fret: Back to worrying about inflation? (6) Rising PPI costs likely to pinch profit margins fattened by tax cuts rather than getting pushed up into CPI. (7) Rising costs mostly attributable to rising commodity prices, particularly oil prices. (8) The Fed sends a memo about inflation to investors: Don’t fret. (9) Overshooting inflation target might not change Fed’s gradual pace of normalization. (10) “Beirut” (+).
Earnings, Genes & Brazil
(1) What do earnings, genes, and Brazil have in common? They’re all remarkable. (2) Get ready for a great Q1 reporting season. (3) Q1 earnings growth in high teens expected; analysts see roughly 20% growth in 2Q, 3Q, and 4Q. (4) Analysts have been upping earnings sights dramatically, for Q1 and 2018, across nearly all sectors. (5) Novartis pays up to beef up its gene-editing capabilities with acquisition of AveXis. (6) Brazil’s MSCI Index has stumbled in April as presidential contender Lula heads off to the clinker. (7) A lulu of a buying opportunity?
Trade War Over Already?
(1) Trade war and peace. (2) The Chinese President’s speech. (3) A perfectly reasonable emperor for life. (4) Xi has turned into one of globalization’s biggest defenders. (5) Trump’s bilateral approach to making free trade fairer may be working. (6) Is Panic Attack #60 over yet? If so: Here comes another relief rally. (7) The best late-cycle earnings season ever. (8) Shortage of truck drivers hasn’t stopped ATA Truck Tonnage Index from making new highs. (9) Record-high tonnage per truck driver: productivity or overtime?
Meet John Williams
(1) A big promotion at the Fed. (2) A voter for all seasons. (3) Williams is a gradualist. His dots are in the middle of the pack. (4) Fed aiming for 3.50% by 2020. (5) Fed study says new normal for real GDP growth is 1.6%. (6) Williams agrees that’s the trend, which is counter to the projections of Trump’s supply-siders. (7) Demography is determining weak labor force growth. (8) Waiting for technology to boost productivity growth. (9) Why aren’t wages up 3%-4% by now? (10) Baby Boomers aren’t retiring and aren’t getting paid more.
One-Man Plunge-Protection Committee
(1) Chronology of recent trade war of words (TWW). (2) China and US playing tit for tat. (3) It takes two to tango. (4) Kudlow playing role of good cop on trade. (5) Kudlow hopes he can beat the Mooch. (6) Never a dull moment in the Trump House. (7) Noise vs signal and signal vs signal. (8) Corrections are followed by rebounds or they turn into bear markets. (9) Counting on better-than-expected earnings to offset TWW. (10) Fundamental Stock Market Indicator remains fundamentally strong. (11) “Chappaquiddick” (+ + +) is a remarkable movie reminding us that the Kennedy clan’s Camelot was anything but.
Margin Pressures
(1) Is the market-cap weight of the Tech sector too high? (2) Tech earnings justify high market-cap share, but not if the sector’s profit margins are at risk. (3) Why is Walmart eyeing Humana? (4) While overall inflation remains subdued, there are a few signs of mounting inflationary pressures. (5) Striking teachers and shortage of truck-driving Teamsters. (6) USTR report says China doesn’t play fair.
Trump’s Bumps, Slumps, and Thumps
(1) Still looks like a solid global synchronized boom. (2) The world’s economies are too interdependent for protectionism to prevail. (3) Good growth in global trade stats. (4) Lots of upbeat M-PMIs in March around the world. (5) Forward revenues of All Country World MSCI rising rapidly in record-high territory, led by the US. (6) Net Revenues Revisions Indexes remain positive, with lots of the upward revisions in the US. (7) Is Trump bullish or bearish for the stock market?
Record Corporate Cash Flow
(1) April is a big month for dividend payouts. (2) That might explain “Go away in May.” (3) TCJA likely to provide one-time boost to level of dividends. (4) Repatriated earnings likely to boost buybacks more than dividends. (5) February outflows from equity funds surprisingly small given the selloff in stocks that month. (6) US-based ETFs still seeing large net inflows, especially to global ones. (7) Foreign investors warmed up to US stocks last year. (8) Solid gains in NIPA profits from current production last year. (9) Plenty of corporate cash available from internal funds and bond issuance to fund lots of share buybacks and capital spending.
Speed Bump for Tech
(1) Assessing the tech wreck. (2) In the future, there will be more innovation. (3) Nvidia’s man in a black leather jacket is bullish on the future. (4) A terrible accident won’t stop self-driving cars. (5) A reasonably valued sector with some outliers. (6) Safe havens are less stormy now that the bond yield has edged lower. (7) Food fight among grocers. (8) Takeout meals delivered to your front door. (9) Fulfilling is getting more costly. (10) What’s the difference between the business practices of China and the Corleones? Scale.
In the Spring, There Will Be Growth
(1) Goldilocks likes spring best of the four seasons. (2) Chauncey’s economic forecast. (3) Q1 earnings season is coming, and it could be better than expected despite upward earnings revisions. (4) S&P 500/400/600 revenues outlook continues to improve. (5) Analysts still revising S&P 500 revenues higher on balance. (6) Earnings expected to grow around 20% for S&P 500 this year. (7) Still plenty of buybacks and dividend payouts to fuel bull market. (8) Consumers have the means to spend more. They also have the confidence to do so. (9) The unemployment rate is likely to fall further.
Meet Jerome Powell
(1) Hotcakes gum up Amazon’s algorithms. (2) Cheaper by the half dozen. (3) Six fed funds rate hikes since start of “normalization.” How many more to go? (4) 3.00% fed funds rate may be the new normal. (5) A refreshing change: Jerome Powell is a lawyer, not an economist. (6) Giving less weight to unobservable measures of slack. (7) The yield curve is neither here nor there. (8) Powell is a low-key middle-of-the-road fellow. (9) Taking a deep dive into the USTR’s case against China’s unfair trade practices. (10) The Chinese government wants more high-tech stuff to be made in China by 2025.
Trade: War-Making or Deal-Making?
(1) US declares that China doesn’t play fair. (2) USTR issues 215-page report on China’s abusive trade practices, focusing on technology. (3) Trump likes to negotiate in public, which unnerves stock investors. (4) Trump aspires to be like Reagan, not Hoover, on trade. (5) “A treacherous path on trade.” (6) Panic Attack #60 isn’t over yet. (7) Remarkable divergence between forward earnings and forward P/E. (8) Not much happening in bond and commodity markets. (9) Major exporters already exempted from Trump’s tariffs on steel and aluminum. (10) Reading Trump’s temperament on trade: He likes to negotiate and win. (11) Like it or not, Trump is delivering on his campaign promises on trade.
Correcting Tech & Editing Genes
(1) Trifecta of bad headlines for Tech sector. (2) Facebook is in our faces. (3) Tech M&A will continue. (4) Earnings remain bullish for Tech, and valuations are reasonably high. (5) Tech IPOs still attracting buyers. (6) Crispr 101. (7) Cutting diseases out of our DNA. (8) Is there method in Trump's March tariff madness?
Morning Briefing 2018-03-21
Morning Briefing is also available. (1) Fed officials watch prime-age male dropouts. (2) Nonparticipating slackers. (3) Fed study finds that technology is creating “job polarization.” (4) Vanishing “middle-skills” jobs. (5) Education level matters more than ever. (6) Almost half of nonparticipating prime-age males are on daily pain medication. (7) Fed study explains productivity slowdown resulting from retiring older workers being replaced by younger ones. (8) Technology could overcome Age Wave in productivity equation. (9) Only immigration can halt America’s evolution to same aging profile as Japan’s current geriatric society.
The Animals Remain Spirited
(1) Animal spirits remain elevated following Trump’s Election Day upset. (2) Hard data on earnings are bullish for stocks, while other hard data are mixed. (3) CEOs are ecstatic. (4) Small business owners are euphoric. (5) Purchasing managers are upbeat. (6) Consumer optimism and our Boom-Bust Barometer are boosting our Weekly Leading index, which is bullish for stocks. (7) Weird Q1 weakness in GDP showing up again. (8) Truckers have the pedal to the metal. (9) Widening trade deficit may offset some of Trump’s fiscal stimulus.
Morning Briefing 2018-03-19
A of this Morning Briefing is also available. (1) Meet Ambassador Lighthizer, the US trade czar. (2) USTR’s report card on China’s trade fairness likely to show lots of “F”s. (3) Section 301 making a comeback as US weapon in trade negotiations, or trade war if deals aren’t made. (4) China’s government has big ambitions for state-run economy by 2025. (5) Imposing a price on trade theft. (6) WTO benefits China more than US! (7) Trump’s “America First” puts multilateral trade organizations second. (8) National security becomes a trade issue under Trump, or at least a negotiating position. (9) Steel tariffs may be a sideshow compared to trade conflict with China over technology and intellectual property. (10) Reagan’s team of supply-siders is back.
Retailing: Survival of the Fittest
(1) For the birds. (2) Doves, hawks, and cranes at the Fed. (3) Two FOMC voters see gradual rate hikes. (4) Two FOMC nonvoters see less and more gradual paths. (5) Last department stores standing do so by selling space. (6) Strategic partners are a survival strategy for retailers. (7) Toys Were Us. (8) Blockchain could solve Trump’s trade problem. (9) Maersk keeping track of shipping containers with blockchain. (10) US trade deficit problem worsening, especially with China, as US economy expands.
Slicing & Dicing TCJA Earnings Windfall
(1) More TCJA good news ahead in Q1-2018 earnings season. (2) Revenues also boosting earnings on better global growth, higher oil prices, and weaker dollar. (3) Upward earnings revisions for 2018 driven much more by TCJA than by better rvenues. (4) Profit margins jump as a result of TCJA. (5) Corporations likely to use TCJA windfall for capacity expansion, labor compensation, buy backs, and dividends. (6) While statutory tax rate was cut by 40%, effective rate was cut by 34%. (7) Repatriated earnings should bring back lots of cash, i.e., $1.9 trillion after taxes.
From Headwinds to Tailwinds
(1) Top Fed heads now seeing tailwinds rather than headwinds. (2) The Powell/Brainard tag team. (3) “Gradual” remains the word for rate hikes. (4) Transitory vs structural forces keeping a lid on inflation. (5) Fed is focused on still-depressed labor force participation rate of prime-aged males. (6) House of dollars built on stronger foundation than house of cards. (7) Record net worth for households, with new highs for stocks and homes. (8) Solid rebound in owners’ equity in homes. (9) Ratio of mortgage debt to disposable personal income is down sharply.
Following the Money
(1) #1 Amazon Hot New Release in Investing. (2) Monthly data on equity mutual funds and ETFs showing record inflows into ETFs and lots pouring into all funds investing globally. (3) Nonfinancial corporations continue to buy back shares. (4) The Buffett ratio is looking as rich as it was when the tech bubble burst, but inflation and interest rates are lower. (5) Lots more people working full time. (6) Earned Income Proxy rises to yet another record high. (7) Wage inflation remains subdued, but continues to outpace price inflation. (8) The Phillips curve remains flat. (9) No shortage of bank loans in China. (10) Movie: “Red Sparrow” (+).