Growing number of lower paid workers in US

Feb 5, 2015 | US Economy

The participation rate in the US has declined much less for those at lower levels of education: Source: Macrobond That the lower educated are disproportionately supporting employment growth, through lower paid jobs, may help explain why, so far, we have not seen...

P/Es Waning As A Source of US Equity Returns

Nov 5, 2014 | US Economy

After some very strong years, multiple expansion in the S&P is struggling to contribute to returns in the index.  So far this year, P/E multiple expansion has only contributed 32% to S&P returns (top chart).  More reliance is being placed on top-line growth to...

Economic Downturn Evident in Chemical Prices

Oct 21, 2014 | US Economy

Chemical prices tend to provide a good lead on global economic conditions and the message at the moment is unambiguously negative.  Falling naphtha, polymer and Brent oil prices are indicative of very weak global economic conditions. Source: Variant Perception and...

Pillars of Equity Rally Fall Away

Oct 10, 2014 | US Economy

Stock buybacks have been an important feature of the equity rally.  Companies have used low rates and easy credit to borrow money and used it to buy their own shares back.  An identity for a company’s share price is: S = (revenues * margins * P/E) / # of shares. ...

US Inflation and Wages Continue to Turn Up

Jul 25, 2014 | US Economy

The key message from our leading indicators is that US inflation and wages continue to turn up.  This was one of our core themes for 2014 we discussed in December last year and is bearing out.  Core inflation and headline inflation are positive, while wages are...

Profit Margins to Head Lower, Equities to Suffer

May 22, 2014 | US Economy

Profit margins in the US have hit modern-day record levels, and this has been used to help justify high equity valuations.  Consensus estimates are for profit margins to remain steady, or even increase from current levels.  We disagree for ironclad economic and...