1. Global Financial Conditions
- U.S. and European Financial Conditions improved this week, and remain at levels conducive to risk taking
- Libor, Credit Spreads, and S&P 500 Implied Volatility are low
- S&P 500 P/E multiple is currently 16.31
- Consensus earnings growth for the forward 12 months (FY) is 10.6%
2. Global Equity Markets
- Global Equities continue to rally despite worse than expected economic data
- For Q1 2013, the median growth rate in earnings was 8.7% with 70% of firms beating expectations
- Discretionary and Financials led, while Materials, Utilities, and Energy lagged
- Telecom Services had the biggest positive surprise, beating expectations by a median of 11.1%
- Analyst have raised earning expectations for 8 of 10 sectors
- Q2 2013 earnings growth for the S&P 500 is now seen at 5.0%, up from 3.5%.
- AGA Top Ranked Countries – MTD: #1 Japan: +1.84%, #2 Turkey: +4.86%, #3 Russia: -0.23%, #4 USA: +3.55%, #5 Thailand: -1.31%
3. Interest Rates and Fixed Income
- US 10yr yields have rallied from 1.62% to 1.95% over the last three weeks
- Investment Grade Bonds have retreated with Treasuries, while spreads have narrowed (@1.54%)
- High Yield Bonds spreads widened this week (@3.30%)
4. Major Currencies
- The US Dollar rallied this week and appears to be breaking out of a 4 year triangle pattern
- MXN/USD @ 12.34, weakening from 12.08 last week. The Mexican Central Bank is forecasted to ease rates again in September.
- Commodities (an equally weighted basket) remain in a medium-term downtrend
- Gold @ $1359/oz., down from $1448/oz. last week
- Oil @ $95.91/barrel, down from $96.04/barrel last week
6. The Economy
- Economic Data has been worse than expected over the last 12 weeks
- Retail Sales edged up 0.1% in April, contrary to expectations of -0.4%. YoY, Retail Sales have increased 3.7%, the least since Feb 2010.
- Industrial Production declined 0.5% in April, the most in 8 months, and more than the expectations of -0.2%.
- Capacity utilization fell 0.5%, the most in 8 months, to 77.8%, which argues for low inflationary pressures
- Housing Starts dropped 16.5%, while building permits surged 14.3% (the 2nd most on record)
- Initial Jobless claims jumped 32k, as the 4 week moving average increased 1,250 to 339,250
- PPI fell 0.7% in April, while CPI fell 0.4% (the most since December 2008)
- LEI rose 0.6% in April, the most since Feb 2012 and 2x the expectations
- Consumer Sentiment jumped 7.3 points in May, to a reading of 83.7, the highest level since July 2007
7. Investor Sentiment
- The VIX Index @ 12.45, down from 12.59 last week
- Financial Stress has decreased over the last 4 weeks
- Macro Risk has increase over the last 7 months
Please feel free to forward any questions or suggestions.
disclosure: The opinions expressed in this Weekly Chart Book report are those of the author. The materials and commentary are strictly informational and should be used for research use only. This bulletin is not intended to provide investing or other advice or guidance with respect to the matters addressed in the bulletin. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions that comply with matters addressed in this bulletin. Charts and information used in this report are sourced from Bloomberg.