Another Nail in the Reflation Coffin: Real Yield Curves

Although coincident growth data is holding up for now, there are a number of macro “red flags” at present, in particular flattening yield curves (despite the recent bounce, US 2s10s is still 34bps flatter YTD) and falling excess-liquidity conditions. Yield curves are...

Extreme Complacency on Russell 2000: Buy Puts

(from our Weekly of 21st February) As we have been noting, the market remains in a risk-on regime, with positive momentum, falling volatility and confirmation from various inter-market relationships such as cyclical stocks outperforming high dividend stocks, high...

Higher Inflation Target –> Even More Mispriced USTs

A discussion of late has been whether the Fed should raise its inflation target.  We think this would be a bad idea.  Currently, with a 2% target, the Taylor rule implies the Fed Funds rate should be closer to 2%. With a 3% inflation target, the Taylor rule would...

Peak in Heavy Truck Sales Point to Cyclical Pain

Heavy truck sales are oddly a good leading indicator for the economy.  It is odd because a lot of industrial production is coincident with the business cycle.  However, if you go back over forty years, you can see that recessions have always been preceded by a decline...

Earnings to Fall Further

Profit margins are declining, and we expect them to fall much further.  As you can see from the chart below, Variant Perception’s leading indicator for wages does a very good job of leading US corporate profit margins by a little over a year and a half. The message is...

Profit Cycle Turning Down

The corporate profit cycle is now turning down, and our leading economic indicators point to further declines in return on equity (ROE) and profit margins.  This is not a short-term call on equity markets but a major structural factor investors should bear in mind in...

Manufacturing and Services PMIs Diverge

There has been a sharp divergence between ISM services and non-services in the US. Many of our leading indicators for manufacturing have pointed to weakness. This suggests demand is tilting away from manufacturing and towards the service sector.  The breakdown of the...

US Growth Coming in As Expected

(The following is from our December Leading Indicator Watch (LIW), released December 4th, 2014.  The LIW is a monthly report giving a summary of all or our main leading indicators, allowing clients to forecast early on where the business cycle in major countries is...

US Home Prices to Continue to Rise

(from our Leading Indicator Watch from March 5th, 2015) Our leading indicator for US house prices is supportive of an improvement in price growth. One of the inputs that drives our leading index is the number of months’ supply of new homes.  The continued fall in...
Page 1 of 212