Insight & Commentaries
Light economic data from the United States expected this week, and the European Central Bank (ECB) is expected to deliver additional monetary stimulus. China releases February’s Merchandise Trade Balance, Consumer Price Index, and Producer Price Index while Japan and the EU both release their latest GDP prints. MACRO VIEW We are looking for signs of an upturn in the data when we update our WCA Fundamental Conditions barometer and forecasts next week. For now, we view the recent stabilization in commodities and better tone in the stock market as providing some reason for optimism, but we need further evidence that…
It is not very often that emerging market equities trade with valuations this low compared to the S&P 500. Typically, emerging markets trade with a lower multiple than developed given greater risks. Yet, there have been few times over the last twelve years when emerging markets were valued this low on a price-to-earnings ratio basis compared with the United States. Lower relative valuations reflect a variety of concerns including commodity prices, credit quality, currency, and growth. All of these are valid things to be concerned about and we’ve written about them before. Still, we have seen emerging markets underperform their developed market counterparts for…
The Federal Open Market Committee (FOMC) convenes for the first time in 2016 on Tuesday and Wednesday amid the worst start to the year ever for the equity markets. Market uncertainty and low oil prices have tempered expectations for how quickly the Federal Reserve (Fed) will raise interest rates this year. Unlike the previous FOMC meeting in December 2015, Janet Yellen will not hold a press conference at the conclusion of this meeting. The earnings season is underway and expectations are for a 6% decline in earnings, which would mark the third consecutive quarter of earnings declines. The S&P 500…
A short trading week sees December 2015 Consumer Price Index released on Wednesday, January’s Philadelphia Federal Reserve (Fed) Business Outlook Survey on Thursday, and December 2015 Existing Home Sales on Friday. Consumer prices have been showing more life than other inflation readings. According to Econoday, the consensus for December is for a fourth straight 0.2% gain for the core (ex-food and ex-energy) reading. Total prices are expected to come in unchanged reflecting another expected decline for energy. The Federal Reserve Bank of Atlanta recently lowered its Fourth Quarter of 2015 growth forecast from 0.8% to 0.6% (see below). This would…
China dominates the discussion as we begin a new year. Sharp drops in Chinese stock markets forced closure of mainland exchanges last week. Indications are increasing that China is seeking to further devalue its currency in the face of weak export demand and declines in manufacturing. We think such a move represents a step backward on the path toward rebalancing and internationalization, which ultimately leads to a healthier outcome for China and the world. Devaluation perpetuates dependency on a broken model of export-driven growth and delays a necessary shift toward a greater role of the private sector and domestic consumer…
This morning’s equity market sell-off follows a 7% decline in China’s Shanghai Stock Exchange Composite Index. The decline tripped circuit breakers and led to a closure of China’s exchanges. A weak read on China’s official Purchasing Manager’s Index (PMI) and increased tension between Saudi Arabia and Iran are contributing to the negative tone. China’s PMI remained below 50 for a fifth month and points to continued weakness in China’s manufacturing sector. Protests and an attack on Saudi Arabia’s embassy in Tehran, precipitated by Saturday’s announcement of Saudi Arabia’s execution of 47 prisoners, including a well-known Shiite cleric, adds to investor…
Our macro outlook is for slow growth and stubbornly low inflation. The start of policy normalization following years of zero interest rate policy in the United States comes at a time of weakening global growth and mixed signals from the domestic economy. We continue to view the United States economy as best positioned to weather the overall weak global environment that resurfaced in 2015. In this report, we take a long-term view and address expectations for markets over the long run. Full Report Click Here
Markets will digest data from the real estate market, as Tuesday sees the release of the S&P Case-Shiller Report from October and Pending Home Sales from November is released on Wednesday. Markets are closed on Friday for New Year’s Day. The economy is closing 2015 with a whimper. This week we will get the Chicago Purchasing Managers index for December. Lately, this Index has been weak, reflecting a build of inventories and weak export markets. Chicago is just a regional survey but does a reasonably good job in predicting movements in the national survey which, in turn, is a reasonably…
A Christmas-shortened week sees the final release of third quarter Gross Domestic Product (GDP) on Tuesday and Core Capital Goods Orders on Wednesday. Markets close early on Thursday for Christmas Eve and are closed on Friday for Christmas Day. Core Capital Goods Orders could be the best leading indicator of all on business investment spending. Orders tend to decline six to twelve months before an economic downturn and typically rebound anywhere from three to eighteen months after the bottom of the recession (See chart below). The steady climb in capital goods orders that followed the last recession has slowed somewhat…
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