Commentary

Is the Snap Back in Rates Really that Surprising?

The post-Fed action in the bond market yesterday was impressive, yet left some begging for answers. If the Fed raised short rates yesterday and reiterated its plans for the subsequent five rate increases through 2018, shouldn’t the long-end be selling off? If it were only that easy.

Commentary

Hot Air Balloon Economy

The interplay between debt and income can be a difficult thing to understand. Here is a useful analogy. Imagine a hot air balloon lying on the ground preparing for take-off.

Commentary

A Massive Liquidity Illusion

Since the election we’ve heard the rally in stocks characterized as a “Trump Trade” or a “reflation” trade. We think there is a really important element missing from this analysis that could change very quickly over the next several weeks.

Commentary

Smart Money Bond Investors Still Have Near-Record Long Positioning

The most recent CFTC commitment of traders report revealed little change in the historic long positioning of smart money bond investors.

Commentary

Long-End of US Yield Curve Is Flattening, Short-End SteepeningThe spread between 30-year US treasuri

The spread between 30-year US treasuries and 10-year US treasuries has fallen to just 60 bps which is the smallest spread in about 2 years.

Commentary

Why Hitting 2% Real GDP Growth Is Key For US Corporate Profits

While the myth that stock market returns are highly correlated to a country’s GDP growth rate has largely been debunked, there remains a strong, and intuitive, relationship between corporate profits and GDP.

Commentary

Companies with the Lowest Dividend Yields Are Driving Performance

In the month of January, the most important factor correlation to performance of developed market stocks has been dividend yield (DY).

Commentary

Largest Monthly Gain in US Core-CPI Since March 2006 and More From January’s CPI Report

CPI excluding food and energy (core-CPI) increased by 31 bps in January for the largest one month increase since March 2006. Headline CPI increased to 2.54% year-over-year which is the fastest growth rate since March 2012.

Commentary

Health Care Sector Equity Returns Have A Negative Relationship To Earnings Estimates

Equity returns and earnings estimates should presumably be related. It makes intuitive sense that if earnings estimates are increasing for a sector than equity prices for that sector should trend upwards as well. And this broadly holds up except oddly with the health care sector.

Commentary

Fewer Stocks Outperforming As The Market Moves Higher

Just 44% of developed market stocks have outperformed the MSCI World Index over the past 200 days compared to 57% outperforming on average over the past 15 years.

Commentary

Boom-Bust Barometer Making All-Time Highs

The Boom-Bust Barometer (made famous by Dr. Ed Yardeni) is a simple, but effective, way of avoiding large drawdowns in the stock market. This indicator is calculated by taking the CRB Raw Industrial Price Index divided by initial unemployment claims.

Commentary

6 Industry Groups that Appear to be Short-Term Overbought

Out of 24 developed market industry group, six currently look overbought in the short-term. Two come from the financial sector, two come from the technology sector, one from consumer staples sector (surprisingly) and one from the materials sector.

Commentary

‘Growth’ Stocks Are Outperforming in 2017…Are Lower Bond Yields Next?

After underperforming in 2016, growth stocks have once again started to outperform value stocks in 2017. As the chart below illustrates, the S&P 500 Value Index consistently outperformed the S&P 500 Growth Index from 2002-2006.

Commentary

Openings Exceed Hires in 19 of the Last 22 Months

A Bloomberg article (February 2nd) highlighted a recent survey of 400 executives whose overwhelming concern is talent scarcity.

Commentary

Positive Revisions to Estimates Surge

The percentage of positive revisions to developed market sales and earnings estimates jumped over the last month, with an average of 76% of companies reporting better sales estimates and 70% reporting better earnings estimates.