Category Archives: US Economy - 74 posts found

‘Soft’ Economic Surprises Running Far Ahead of ‘Hard’ Data

For the past few months, we have noted in our Leading Indicator Watch publications that financial market inputs to our leading indicators were running far ahead of actual hard economic data. The same is true for survey data vs real…


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The Dark Side of Reflation

Higher economic growth usually translates into higher bond yields, higher stocks and rising oil prices; but, too much of a good thing is bad for stocks. Over the past few weeks, we’ve shown that our stock/bond RSI signal has triggered….


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Economic Surprise Indices to Fall Due to Rising Oil and Yields

S&P 500 returns are positively correlated to the Citigroup Economic Surprise Index.   The Surprise Index leads the S&P 500 by about two months, as you can see from the chart on the left.  Normally, low levels in the index are…


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Financials Rally at Odds with Credit Cycle

Financials have been the biggest winners since the Trump election  The S&P Bank ETF KBE has rallied 29% since the election.  We’ve written about financials over the past few weeks, but it is worth highlighting again. While we may see…


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Higher Yields a Vulnerability for US Housing

Higher US yields are already leading to higher mortgage rates in the US.  Building permits are one fo the best leading indicators for housing, and mortgage rates themselves lead building permits.  The next chart shows the modest recovery in building…


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Higher Inflation Expectations to Favour Equities over Bonds

(from our Tactical of November 8th 2016) Bond yields have been rising in most countries, and yield curves have steepened across the developed world.  As the top chart shows, the rise in nominal yields has come from a rise in…


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Credit Spreads and Equity Volatility to Rise

(from our Tactical report of 1st November 2016) Equity volatility and credit spreads are almost perfectly correlated. In part this is because equity is a perpetual option on the solvency of a firm. When credit becomes stressed, equity volatility jumps…


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Retail Stocks to Suffer Due to Higher Inflation

Retail sales will suffer in the months ahead due to rapidly rising medical and rental CPI.  Whenever rental and medical costs have risen significantly in the past, they have led to a big decline in retail sales.  You can see…


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Real Yields Wildly Mispriced Given Stagflation Light

The US now has the worst combination of outcomes, poor growth and rising inflation.  Bond yields are now the most negative they have been in almost forty years.  Only in the 1970s during stagflationary episodes were real yields this negative.   …


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Lower ISM Ahead, Weak Read for Stocks

The ISM Manufacturing Index came out at the beginning of the month and offers a dim view of the next three months for US manufacturing as well as for stocks.  The key data we focus on in the ISM is…


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