Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Meet Peter Navarro
(1) Navarro is a controversial fellow. (2) Trade as a national security issue rather than an economic one. (3) He is opposed to foreign direct investments fueled by US trade deficits. (4) Focusing on trade deficit in goods and ignoring surplus in services. (5) Free and fair trade is the goal. (6) Will Navarro get Cohn’s job? (7) Jackie reviews the regulatory unshackling of the Financials. (8) The latest sensation among gamers: Fortnite.
Eurozone Seems Unruly
(1) Eurozone stocks remain as cheap as ever relative to US stocks. (2) It took six months to form a weak German coalition government. (3) There is actually an anti-bailout party in Germany. (4) Merkel’s fourth term will be as a lame duck. (5) German liberals will have more power to spend money. (6) German IFO and M-PMI dip, but remain high. (7) Italy’s latest election produced the usual political circus. (8) Euroskeptics are gaining power in Germany and Italy.
Known Knowns & Unknowns
(1) Tight labor market in US. (2) Global Growth Barometer trending higher. (3) Exports are booming and so are imports, resulting in wider trade deficit. (4) Global export indicators are booming. (5) Revenues per share of All Country World MSCI is at a record high. (6) Analysts now expect TCJA to add almost $12 per share to S&P 500 earnings this year. (7) Protectionism may or may not be a problem. (8) Inflation may or may not remain subdued. (9) The Bond Vigilantes may or may not saddle up.
Dow Vigilantes
(1) The 61st panic attack or more of the 60th? (2) Bearishness about monetary tightening and protectionism offset bullishness of TCJA. (3) One day, a panic attack will be followed by a bear market rather than a relief rally. (4) Trump-led protectionism is a cause for concern. (5) Is Trump going to be like Reagan or like Hoover on trade? (6) Whirlpool got taken to the cleaners. (7) The WTO might temper Trump’s trade tantrum. (8) The Dow Vigilantes could do the same. (9) US economy is cruising so nicely. Why spoil it in time for the mid-term elections? (10) Fed Chairman Powell likely to pursue course of gradual normalization of monetary policy. (11) Movie: “Black Panther” (+).
Phones & Homes
(1) Ready or not: 5G is coming fast. (2) The running of the telecom bulls in Barcelona. (3) Phone service for the IoT. (4) Billions of dollars of new telco infrastructure spending. (5) Washington wants to help. (6) A major facelift coming for S&P Telecom sector. (7) Disappointing housing stats reflect bad weather in Northeast and supply shortage. (8) Toll’s happy tale.
Giddy Up!
(1) Mini-version of 1987. (2) Déjà vu all over again. (3) Updating the bullish impact of TCJA on earnings. (4) Giddy talk on CNBC resulting from giddy talk during latest earnings season conference call. (5) Melissa tunes in to the conference calls of the 30 DJIA corporations. (6) “[D]oggone good!” (7) Tax reform making US companies more competitive, with greater “capital flexibility.” (8) TCJA windfall likely to boost capital spending, buybacks, dividends, and employee benefits. (9) Lots of talk about funding organic growth rather than M&A.
Earnings Are Great Again
(1) Earnings in outer space. (2) Earnings were on course to be great again before Trump, and now will be even greater after TCJA. (3) Revenues growth above 9% y/y during Q4. (4) Forward revenues at record high. (5) Double-digit earnings growth during 2017 will be followed by more of the same in 2018. (6) Forward earnings signaling $160 per share in 2018. (7) Profit margin rose to new record high during Q4, and that was before TCJA will push it higher! (8) Lots of new record highs for revenues and earnings among the 11 sectors of the S&P 500.
Fed on Inflation Watch
(1) Panic attacks come and go. (2) Was the 60th panic attack really a correction since it was so short? (3) Wish came true for correction hunters. (4) The latest flash crash was an abridged version of Black Monday (October 19, 1987). (5) No sign of imminent recession in LEI or CEI. (6) Growth rate of CEI suggests real GDP growth remains around 2% y/y. (7) No boom, no bust. (8) Will the Bond Vigilantes spoil the party? (9) Bond yields are normalizing. (10) Fed officials rooting for inflation to rise to their 2% target. (11) Fed staff conceding macro inflation models aren’t working, yet Fed officials continue relying on them.
Deflating & Inflating Industries
(1) Amazon is eating the lunch of brand names. (2) Walmart’s disappointing counterattack. (3) Squeezing the ketchup makers. (4) Materials companies have pricing power. (5) Trump’s infrastructure spending planning is a starting point. (6) Trump administration considering limiting imports of steel and aluminum. (7) Robots are learning to knit. (8) Swedes go cashless. (9) BP boosting its forecast for number of electric cars.
Soarin’ Fundamentals for Stocks
(1) The Magic Kingdom. (2) FastPass+ is the way to go. (3) Our Boom-Bust Barometer is soaring to new highs. (4) The same goes for our Weekly Leading Index, as weekly consumer confidence soars. (5) Forward earnings has been flying. (6) Analysts raised S&P 500 earnings for 2018 by over $11 since TCJA. (7) A year’s increase in 9 weeks for 2018 earnings of S&P 500/400/600. (8) Joe drills down to the S&P 500 sectors and industries to determine impacts of TCJA.
Living with Lowflation
(1) The 60th panic attack. (2) The 60th relief rally. (3) Learning to live with slightly higher lowflation. (4) Inflation indicators mostly show mounting inflation pressures, or maybe not. (5) Liquidity is a fluid concept. (6) Combined balance sheets of Fed, ECB, and BOJ still expanding. (7) Chinese banks are flooding China with liquidity. (8) Flood of repatriated earnings heading back to US. (9) TCJA adding lots of bucks to earnings. (10) Watching out for inflation.
Life on the Edge
The next Morning Briefing will be sent on Tuesday, February 20. (1) Will the cloud lose to the edge? (2) More devices connected to the Internet. (3) Every millisecond counts. (4) Disrupting the disruptors. (5) Internet of Things requires lots of semiconductors. (6) Powell won’t take the punch bowl away, but he won’t be adding any more punch. (7) The value of the trade-weighted dollar is mostly determined by relative growth of US to the rest of the world. (8) ECB seeing expansion rather than recovery in Eurozone. (9) Chinese currency has been strong. (10) The dollar has its ups and downs.
Ups & Downs of the Dollar
(1) Will the weak dollar boost earnings and inflation too? (2) The stock market’s tug-of-war between earnings and valuation. (3) Dollar bulls have been surprised by dollar’s weakness since early 2017 despite three Fed rate hikes. (4) Dollar inversely correlated with Global Growth Barometer. (5) Dollar inversely correlated with S&P 500 revenues and earnings. (6) Dollar’s impact on inflation is fuzzy. (7) Go Global has made more sense than Stay Home since dollar peaked in early 2017. (8) Sandra’s scorecard for Italy’s political and economic scene.
Huge Jump in Earnings
(1) Analysts now saying TCJA adding $11-$12 per share to S&P 500 earnings this year. (2) Joe says $14-$15 is likely. (3) Earnings meltup should trump P/E meltdown. (4) Even revenue estimates seem to have gotten a big TCJA boost. (5) Raising our 2018 and 2019 S&P 500 earnings estimates to $155 and $166 based on trend growth plus TCJA bump. (6) Following TCJA upward earnings revisions, earnings forecasts should resume usual downward drift. (7) Sticking with 3100 year-end forecast for S&P 500 thanks to strong earnings tailwind. (8) Lots of upbeat earnings indicators.
Algorithms Behaving Badly
(1) Get a neck brace. (2) ETF-led flash crash. (3) S&P 500 down slightly from when taxes were cut at the end of last year. (4) The differences between the 2016 and 2018 tightening tantrums. (5) Bouncing off the 200-dma. (6) Consensus expected S&P 500 earnings for 2018 now almost $11 more than before tax cut. (7) Latest correction wasn’t a Black Swan event, strictly speaking. (8) Bond Vigilantes are saddling up. (9) Dudley’s small potatoes. (10) Fed is starting to taper its balance sheet just as fiscal policy is ballooning the federal budget deficit. (11) Raising our bond yield forecast to 3.00%-3.50%.
More Tax Windfalls
(1) The 1970s are back for US oil output. (2) US oil trade deficit is tiny. (3) US frackers may be about to put a lid on oil prices. (4) Energy earnings have been energized. (5) Exxon planning on spending more to make America even greater in oil production. (6) Exxon has been paying its taxes on foreign earnings. (7) Valero planning to buy back shares with extra cash. (8) Mickey’s effective tax rate will fall from 35% to 21%. (9) MaBell used cash windfall to pay bonuses and for medical plan, and will spend more on capital equipment.
Panic Attack #60
(1) Stock market still suffering from PTSD. (2) Counting the number of panic attacks on 12 hands. (3) A few Fed tapering and tightening tantrums along the way. (4) From FOMO to LIFO. (5) Missing Yellen already. (6) Asking to see the Powell Put. (7) No ETF flash crash so far. (8) Valuation correction leaves stocks pricey, but not excessively so. (9) It may be too late to panic.
Fundamentally Strong
(1) While valuation may be an issue, earnings are no problem for stock prices. (2) Measures of business revenues growth are strong. (3) S&P 500/400/600 forward revenues rising in record territory. (4) January M-PMIs confirm that global economy is strong. (5) TCJA has boosted analysts’ 2018 EPS consensus for S&P 500/400/600 by 6.2%, 5.1%, and 6.0% so far. (6) Each quarter of 2018 likely to show double-digit growth rates for S&P 500 earnings. (7) TCJA likely to reduce federal corporate income taxes from $283 billion last year to $211 billion this year.
666 Again!
(1) Robert Langdon, where are you? (2) A repeating number. (3) Another Black Monday today? (4) Analysts have raised S&P 500 EPS estimate for 2018 by $9.00 since tax cut! (5) Despite Friday’s wage-led panic attack, wage inflation remains subdued for most workers. (6) Higher wage inflation won’t necessarily beget higher price inflation. (7) Tightening tantrum started in the bond market earlier this year. (8) Welcome, Jerome Powell. Hope it isn’t 1987 all over again. (9) Fed’s Williams says stay calm. (10) Adieu, Fairy Godmother, we will miss you. (11) Can the bull charge ahead without fairy dust?
How To Spend Tax Windfalls
(1) Industrial sector was mighty strong even before tax cut. (2) Next boosters for sector could be infrastructure and defense spending. (3) Looking even better ex-GE. (4) Notes from three conference calls: Honeywell, Lockheed Martin, and Illinois Tool Works. (5) Repatriated earnings will be used for share buybacks, dividends, M&A, capital spending, and to increase matches for 401(k)s. (6) Simpler global tax structures will reduce accounting and legal costs. (7) The best offense is more defense spending. (8) Paying pension plans forward. (9) More R&D. (10) Hint of inflation. (11) Quacks disrupting healthcare.
Looking Under GDP’s Hood
(1) Growth is good and getting better. (2) The Q1 curse hitting Citigroup Economic Surprise Index. (3) Year-over-year growth in real GDP still more like 2.5% than 3.0%. (4) Will Trump’s tax cuts boost economy’s cruise speed? (5) Capital spending rebounding smartly, led by equipment spending. (6) Information processing equipment and software among the strongest components of capital spending. (7) Transportation equipment spending recovering from recent dip. (8) R&D at record high. (9) Inflationary pressures remain subdued in GDP.
Profits: Us vs Them
(1) Profits growth during recoveries and expansions. (2) TCJA bumps earnings growth above 7% long-term trend line. (3) Analysts are predicting much higher earnings from tax cut than we are. (4) Stocks are more fairly valued if the analysts are right about earnings. (5) Analysts’ estimated tax-cut impact on corporate profits implies big hit to corporate taxes collected by US Treasury. (6) The Bond Vigilantes Model has been too bearish on bonds since the start of the current expansion. (7) Central banks’ QE programs and weak economic growth have kept yields down. (8) Fed rate hikes and normalization of ECB and BOJ monetary policies, along with faster US growth, could push US yields higher.
Don’t Worry, Be Wealthy
(1) Meltups don’t have to be followed by meltdowns if they are fundamentally based. (2) A brief chronology of our meltup call. (3) Let’s try a different analogy: simmering and boiling water. (4) HUGE increase in stock market wealth y/y. (5) Trickling up and down. (6) One-shot bonuses won’t boost wage inflation. (7) Sentiment as bullish as in early 1987. (8) The next bear market could be like 1987, when stocks recovered rapidly because there was no recession in earnings. (9) Movie Review: “Hostiles” (+).
Upward Revisions
(1) Drilling down to assess TCJA’s impact on S&P 500 sectors’ earnings estimates. (2) Big jump in S&P 500’s NERI, led by Financials sector. (3) Consensus earnings growth higher in 2018 than 2017 for most sectors! (4) Drilling down deeper to the industries showing biggest TCJA earnings spikes. (5) Financials 2018 earnings expectations broadly up in double-digits across all major industries. (6) US Bancorp working on four-minute loans. Do you want fries with that? (7) Fintech is in the Wild West.
Off the Charts
(1) The teetotaler-in-chief. (2) High on tweets. (3) Stocks are high on after-tax earnings. (4) Since the TCJA, industry analysts have been scrambling to boost earnings estimates. (5) Forward earnings rising faster than forward revenues, sending forward profit margins higher. (6) A good problem to have: stock prices going through the roof and our charts’ scales. (7) Adding another angel to Blue Angels. (8) Lovefest in Davos as IMF raises world economic outlook.