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World Markets Weekend Update: Six of the Eight Post Losses ... Again

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August 27th, 2016

Only two of the eight equity indexes on our global watch list posted week-over-week gains in our latest update, same as last week. The two Eurozone indexes, France's CAC and Germany's DAXK, were the two who finished in the green, a shift from the Asian advance the previous week, when the Shanghai and Hang Seng were the sole gainers. In fact, the Shanghai Composite did a complete flip from its 1.88% gain the previous week to its -1.22% finish on Friday. The average of the eight improved fractionally from -0.56% the previous week to -0.39% for the latest.

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S&P 500 Snapshot: A Modest Loss Follows the Jackson Hole Drama

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August 26th, 2016

This morning's Second Estimate of Q2 GDP at 1.1% was a ho-hum event in advance of Fed Chair Yellen speech at Jackson Hole. And indeed the intraday range volatility of today's session was at the 70th percentile of the 165 market days of 2016 and the widest in 37 sessions. The S&P 500 opened higher, rallied with the opening of her speech, and then sold off sharply during with Vice Chairman Stanley Fischer's suggestion that a couple of rate hikes this year were possible. The index bounced back later in the afternoon to its -0.16% Friday close. The index is down 0.68% for the week.

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Visualizing GDP: An Inside Look at the Q2 Second Estimate

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August 26th, 2016

The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.

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Q2 Real GDP Per Capita: 0.39% Versus the 1.1% Headline Real GDP

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August 26th, 2016

The Second Estimate for Q2 GDP, to one decimal, came in at 1.1 percent, down slightly from from 1.2 percent in the Advance Estimate. With a per-capita adjustment, the data is a bit more than a third of the headline number at 0.39 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

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ECRI Weekly Leading Index: WLI Inches Up

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August 26th, 2016

Today's release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 138.1, up 0.2 from the previous week. Year-over-year the four-week moving average of the indicator is now at 4.65%, up from 4.38% the previous week and its highest since November 2013. The WLI Growth indicator is now at 8.1.

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Michigan Consumer Sentiment: August Final Eases Back

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August 26th, 2016

The University of Michigan Final Consumer Sentiment for August came in at 89.8, a 0.2 point decrease from the 90.0 July Final reading. Investing.com had forecast 90.6.

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Q2 GDP Second Estimate: 1.1 Percent, As Expected

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August 26th, 2016

The Second Estimate for Q2 GDP, to one decimal, came in at 1.1 percent, a slight decrease from the 1.2 percent Advance Estimate. Today's number was in line with most mainstream estimates, with Investing.com posting a consensus of 1.1 percent.

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The "Real" Goods on the July Durable Goods Data

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August 25th, 2016

Earlier today the Census Bureau posted the Advance Report on Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments. In the charts the gray line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index for All Commodities, chained in today's dollar value.

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RecessionAlert Weekly Leading Index Update

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August 25th, 2016

RecessionAlert has launched an alternative to ECRI's Weekly Leading Index Growth indicator (WLIg). The Weekly Leading Economic Index (WLEI) uses fifty different time series from these categories: Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, Credit Market Composite. The latest index reading comes in at 16.4, up from the previous week's revised 14.5.

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Kansas City Fed Survey: August Activity Still Declining

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August 25th, 2016

The latest index came in at -4.0, which indicates declining activity after a negative reading of -6.0 in July. The future outlook decreased to 11.0 from 14.0 last month. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

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Weekly Unemployment Claims: Down 1K from Last Week, Better Than Forecast

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August 25th, 2016

Today's seasonally adjusted 261K new claims, down 1K from last week's 262K, was below the Investing.com forecast of 265K. This is the 77th consecutive week under 300K, the longest streak since 1970.

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July Durable Goods Orders Bounce Back

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August 25th, 2016

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the July durable goods numbers. The latest new orders number at 4.4% month-over-month (MoM) was above the Investing.com consensus of 3.3%. However, the series is down 3.3% year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 1.5% MoM, which was above the Investing.com consensus of 0.5%. The core measure is down 0.6% YoY.

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Existing-Home Sales: Lost Momentum in July, YoY Now Negative

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August 24th, 2016

This morning's release of the July Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.39 million units from 5.57 million in June. The Investing.com consensus was for 5.51 million. The latest number represents a 3.2% decrease from the previous month and a 1.6% decrease year-over-year.

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FHFA House Price Index Up 1.2% in Q2

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August 24th, 2016

The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. U.S. house prices rose slightly in June, up 0.2 percent on a seasonally adjusted basis from the previous month. Year-over-year the index is up 5.6% (nonseasonally adjusted).

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Gasoline Volume Sales and our Changing Culture

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August 23rd, 2016

The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-June, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

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July New Home Sales Soar to 12.4% Month-over-Month, Surprises Forecast

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August 23rd, 2016

This morning's release of the July New Home Sales from the Census Bureau came in at 654K, up 12.4% month-over-month from a revised 582K in June. Seasonally adjusted estimates for April and May were revised. The Investing.com forecast was for 580K.

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Richmond Fed: Manufacturing Declines in August

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August 23rd, 2016

Today the Richmond Fed Manufacturing Composite Index dropped 21 points to -11 from last month's 10. Investing.com had forecast 6. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -3.5, indicates contraction.

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Markit Manufacturing PMI: Further Improvement, But Softer Than July

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August 23rd, 2016

The preliminary August US Manufacturing Purchasing Managers' Index conducted by Markit came in at 52.1, down from the 52.9 July final. Today's headline number came in below the Investing.com consensus of 52.7. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

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Vehicle Miles Traveled: Another Look at Our Evolving Behavior

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August 23rd, 2016

The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through June.

"Travel on all roads and streets changed by 3.2% (8.6 billion vehicle miles) for June 2016 as compared with June 2015." The less volatile 12-month moving average was up 0.27% month-over-month and 3.1% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up 0.19% month-over-month and up 2.0% year-over-year.

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Weekly Gasoline Price Update: Regular and Premium Up Four Cents

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August 22nd, 2016

It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium are up four cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $2.69 with San Francisco the most expensive city, averaging $2.83. South Carolina has the cheapest at $1.88. The WTIC end of day spot price closed at 47.41, an increase of 1.67 from this time last week.

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Understanding the CFNAI Components

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August 22nd, 2016

The Chicago Fed's National Activity Index, which we reported on yesterday, is based on 85 economic indicators drawn from four broad categories of data:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption and Housing
  • Sales, Orders, and Inventories

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Chicago Fed: Economic Growth Increased in July

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August 22nd, 2016

"Index shows economic growth increased in July": This is the headline for today's release of the Chicago Fed's National Activity Index. Here is the opening summary: "Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.27 in July from +0.05 in June. Three of the four broad categories of indicators that make up the index increased from June, and three of the four categories made positive contributions to the index in July."

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Treasury Snapshot: Slight Increase in Yields Today

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August 19th, 2016

Let's take a closer look at US Treasuries since the Brexit vote to leave the EU. Today saw jumps in yields on all instruments. The yield on the 10-year note ended the day today at 1.58% and the 30-year bond closed at 2.29%.

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The Philly Fed ADS Business Conditions Index Update

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August 19th, 2016

The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index.

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Five Decades of Middle Class Wages: July 2016 Update

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August 18th, 2016

We've updated this series to include last week's release of the Consumer Price Index as the deflator and the July monthly update. The latest hypothetical annual earnings are at $36,379, down 12.8% from 44 years ago.

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Conference Board Leading Economic Index "Picked Up Again in July"

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August 18th, 2016

The Latest Conference Board Leading Economic Index (LEI) for July increased 0.4 percent to 124.3 from June's revised 123.8 (previously 123.7) and an upward revision was made to May's number. The latest indicator value came in above the 0.3 month-over-month percent forecast by Investing.com.

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Philly Fed Manufacturing Index: Positive, but Remains Weak in August

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August 18th, 2016

The latest Manufacturing Index came in at 2.0, up from last month's -2.9. The 3-month moving average came in at 1.3, up from 0.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 45.8, an increase over the previous month's 33.7.

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What Inflation Means to You: Inside the Consumer Price Index

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August 17th, 2016

Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.

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Secular Trends in Residential Building Permits and Housing Starts

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August 17th, 2016

Over the long haul the two series offer a compelling study of trends in residential real estate. Here is an overlay of the two series since the 1959 inception of the Starts data and the Permits data, which began being tracked a year later. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates.

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Millennials and the Labor Force: A Look at the Trends

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August 17th, 2016

Millennials make up the largest percentage of our population today, yet have seen some of the lowest labor force participation growth and highest unemployment out of all age groups since the turn of the century. This has larger implications when coupled with slow wage growth, high home prices, and mounting student debt.

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The Big Four Economic Indicators: Real Retail Sales Go Nowhere

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August 16th, 2016

Note: With the release of this morning's Consumer Price Index, we've updated this commentary to include the Real Retail Sales data for July.

Month-over-month nominal sales were flat in July (-0.04% to two decimals). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, were also flat (0.003% to three decimals), an overall decline from the June real MoM 0.61% increase. The chart gives us a close look at the monthly data points in this series since the end of the last recession in mid-2009. The linear regression helps us identify variance from the trend.

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Inflation: An X-Ray View of the Components

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August 16th, 2016

Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

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The Big Four Economic Indicators: Industrial Production Rebounds Accelerates

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August 16th, 2016

Today's report on Industrial Production for July shows a month-over-month increase of 0.7 percent, which was significantly better than the Investing.com consensus of 0.3 percent. The previous month's 0.6 increase was revised downward to a 0.4 percent decline. The July advance marks a further improvement from for in indicator that has contracted for 14 of the last 20 months, although on a quarterly basis, Industrial Production has contracted for the past three quarters.

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A Long-Term Look at Inflation

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August 16th, 2016

The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the year-over-year inflation rate at 0.84%. It is substantially below the 3.79% average since the end of the Second World War and its 10-year moving average, now at 1.80%.

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New Residential Building Permits: July Count Below Expectations

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August 16th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential building permits. The latest reading of 1.152M was a slight decrease over a revised 1.153M in June and below the Investing.com forecast of 1.160M.

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New Residential Housing Starts in July Beat Expectations

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August 16th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential housing starts. The latest reading of 1.211M was above the Investing.com forecast of 1.180M. The June count was revised downward by 3 thousand and the May downward by 7 thousand.

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Consumer Price Index: Headline Inflation Eases a Bit

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August 16th, 2016

The Bureau of Labor Statistics released the July CPI data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 0.84%, down from 1.01% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.20%, little changed from the previous month's 2.26%, although rounded to a decimal it's slight decrease from 2.3% to 2.2%.

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Medals, GDP, and the 2016 Rio Olympics

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August 15th, 2016

With the 2016 Rio Olympics in the news and on many minds, we decided to investigate whether particular indicators were a predictor of performance.

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NAHB Housing Market Index: Builder Confidence Rises in August

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August 15th, 2016

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 60 was a two point increase and matched the Investing.com forecast of 60.

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Empire State Manufacturing Declines in August

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August 15th, 2016

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -4.2 (-4.21 to two decimals) shows a significant decrease from last month's 0.55, and signals declining activity. The Investing.com forecast was for a reading of -2.50.

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Trends in the Teenage Workforce Update

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August 12th, 2016

Last July CNN Money featured an article with the optimistic and intriguing title "More American teens are getting jobs. That's good for everyone." After reading the article, we revised one of our monthly charts on Labor Force Participation to include the age 16-19 cohort -- one we elsewhere combine with the 20-24 year-olds. We've updated this article to include the latest employment data.

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July Retail Sales Disappoint

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August 12th, 2016

The Census Bureau's Advance Retail Sales Report for July released this morning was rather disappointing. Headline sales came in flat month-over-month to one decimal, which conceals a a tiny 0.4% decline at two decimal places. The Investing.com consensus was for 0.4%. Core sales (ex Autos) came in at -0.3% MoM. The Investing.com consensus was for a 0.2% increase.

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July Producer Price Index Plummets

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August 12th, 2016

Today's release of the July Producer Price Index (PPI) for Final Demand came in at -0.4% month-over-month seasonally adjusted, down dramatically from 0.5% in June. This is the largest seasonally adjusted MoM decline since February 2015, 17 months ago. It is down 0.2% year-over-year versus the 0.3% YoY last month. Core Final Demand (less food and energy) came in at -0.3% MoM, down from 0.4% the previous month and is up 0.7% YoY. The Investing.com MoM consensus forecasts were for 0.1% headline and 0.2% core.

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What Would It Take for the Prime U.S. Workforce to Fully Recover?

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August 10th, 2016

We've updated our workforce analysis to include last week's Employment Report for July. The unemployment rate remained unchanged at 4.9% and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) was at 255K with upward revisions to May and June numbers for a gain of 31K.

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Job Openings & Labor Turnover: Clues to the Business Cycle

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August 10th, 2016

The latest JOLTS report (Job Openings and Labor Turnover Summary), data through June, is now available. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939, while the BLS began tracking JOLTS in December 2000. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends.

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Demographic Trends for the 50-and-Older Work Force

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August 9th, 2016

Note: This commentary has been updated with the latest numbers from last week's Employment Report.

This is not the scenario that would have been envisioned a generation ago for the "Golden Years" of retirement. Consider: Today nearly one in three of the 65-69 cohort and about one in five of the 70-74 cohort are in the labor force.

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The Latest Look at Long-Term Trends in Employment by Age Group

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August 9th, 2016

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution). The result is the participation rate expressed as a percent.

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NFIB: Small Business Survey: "Pretty Much Unchanged"

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August 9th, 2016

The latest issue of the NFIB Small Business Economic Trends is out today. The headline number for July came in at 94.6, little changed from the previous month's 94.5. The index is at the 25th percentile in this series. Today's number came in slightly below the Investing.com forecast of 94.7.

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Multiple Jobholders: Two Decades of Trends as of July

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August 8th, 2016

What are the long-term trends for multiple jobholders in the US? The Bureau of Labor Statistics has two decades of historical data to enlighten us on that topic, courtesy of Table A-16 in the monthly Current Population Survey.

At present, multiple jobholders account for almost five percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.

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Ratio of Part-Time Employed Remains Higher Than the Pre-Recession Levels

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August 8th, 2016

Let's take a close look at Friday's employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs.

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The Labor Market Conditions Index for July Shows Improvement

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August 8th, 2016

In light of the favorable jobs report for July, the latest update of the Labor Market Conditions Index has eased upward into positive territory. The LMCI is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. The latest LMCI update came in at 1. The June value was revised upward to -0.1 (previously -1.9), and the May value was revised upward to -3.4 (previously -3.6). The cumulative index (discussed below) peaked six months ago in December 2015.

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Treasury Yields: A Long-Term Perspective

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August 6th, 2016

Let's have a look at a long-term perspective on Treasury yields. The chart here shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.

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The Civilian Labor Force, Unemployment Claims and the Business Cycle

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August 5th, 2016

What does the ratio of unemployment claims tell us about where we are in the business cycle and our current recession risk? At present, the ratio for Continued Claims has been trending down. Excluding the 1981 recession, the Initial Claims trough lead time for a recession has ranged from 7 to 22 months with an average of 12 months if we include the 1981 recession and 14 months if we exclude it. Admittedly, the last recession is an extreme example, but the Initial Claims trough preceded its December 2007 onset by a whopping 22 months.

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The Big Four Economic Indicators: July Nonfarm Employment

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August 5th, 2016

This commentary has been updated to include this morning's release of Nonfarm Employment for July. As the adjacent thumbnail of the past year illustrates, Nonfarm Employment remains in its upward trend. The June report of 255K new jobs was substantially above expectations (Investing.com was looking for 180K). The latest numbers report included an 18K upward revision for June and a 13K upward revision for May.

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June Trade Deficit Up 3.6B from Revised May

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August 5th, 2016

The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services.

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July New Jobs Substantially Beat Expectations

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August 5th, 2016

This morning's employment report for July showed a 255K increase in total nonfarm payrolls along with an 18K upward revision for June and a 13K upward revision for May. The Investing.com consensus was for 180K. The unemployment rate remained unchanged at 4.9%.

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Light Vehicle Sales Per Capita: Our Latest Look at the Long-Term Trend

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August 3rd, 2016

For the past few years we've been following a couple of transportation metrics: Vehicle Miles Traveled and Gasoline Volume Sales. For both series we focus on the population adjusted data. Let's now do something similar with the Light Vehicle Sales report from the Bureau of Economic Analysis. This data series stretches back to January 1976. Since that first data point, the Civilian Noninstitutional Population Age 16 and Over (i.e., driving age not in the military or an inmate) has risen about 64%.

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A Closer Look at This Morning's ADP Employment Report

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August 3rd, 2016

In this morning's ADP employment report we got the July estimate of 179K new private sector employment jobs, an increase from June's 176K, which was a 4K upward revision from 172K, and May was revised upward by 13K.The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail.

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Markit Services PMI Remained Muted in July

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August 3rd, 2016

The July US Services Purchasing Managers' Index conducted by Markit came in at 51.4, unchanged from the preliminary estimate and little changed from 51.3 in June. The Investing.com consensus was for a slightly lower 51.0. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

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ISM Non-Manufacturing: PMI Down Slightly in July, Continued Growth

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August 3rd, 2016

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 55.5 percent, down 1.0 percent from last month's seasonally adjusted 56.5 percent. Today's number came in slightly below the Investing.com forecast of 56.0 percent.

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Anticipating the July Employment Data: 179K New Nonfarm Private Jobs

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August 3rd, 2016

The economic mover and shaker this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository). Today we have the July estimate of 179K new nonfarm private employment jobs from ADP, an increase from June's 176K, which was a 4K upward revision from 172K, and May was revised upward by 13K.

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The S&P 500, Dow and Nasdaq Since Their 2000 Highs

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August 3rd, 2016

This update is a response to a standing request from a couple of sources that we also share with regular visitors to my Advisor Perspectives pages. The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. Here two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI).

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Moving Averages: July Month-End Update

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August 2nd, 2016

Valid until the market close on August 31, 2016

The S&P 500 closed July with a monthly gain of 3.56% after a modest gain of 0.09% last month, its largest gain since March. All three S&P 500 MAs are signaling "invested" and all five Ivy Portfolio ETF MAs are signaling "invested". In the table, monthly closes that are within 2% of a signal are highlighted in yellow.

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Two Measures of Inflation and Fed Policy

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August 2nd, 2016

The BEA's Personal Consumption Expenditures Chain-type Price Index for June, released today, shows that core inflation remains below the Federal Reserve's 2% long-term target at 1.57%. The most recent Core Consumer Price Index release, also data through June, is higher at 2.26%. The Fed is on record as using Core PCE data for its primary inflation gauge. Headline inflation for both series is conspicuously lower, largely a result of low energy costs.

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Market Remains Overvalued, Up from Last Month

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August 2nd, 2016

Here is a summary of the four market valuation indicators we update on a monthly basis.

  • The Crestmont Research P/E Ratio
  • The cyclical P/E ratio using the trailing 10-year earnings as the divisor
  • The Q Ratio, which is the total price of the market divided by its replacement cost
  • The relationship of the S&P Composite price to a regression trendline

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Market Valuation, Inflation and Treasury Yields: Clues from the Past

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August 2nd, 2016

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns. In a "normal" market environment -- one with conventional business cycles, Federal Reserve policy, interest rates and inflation -- current valuation levels would be a serious concern.

But these are different times.

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Market Cap to GDP: An Updated Look at the Buffett Valuation Indicator

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August 2nd, 2016

With last week's release of the Advance Estimate of Q2 GDP, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 126.3%, up from 118.6% for the Q1 Third Estimate. It is off its 130.9% interim high in Q1 of 2105 and remains under 2 standard deviations from its mean.

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Little Change in the June PCE Price Index

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August 2nd, 2016

The Personal Income and Outlays report for June was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.88%, down from the previous month's revised 0.94%. The latest YoY Core PCE index (less Food and Energy) came in at 1.57%, down slightly from the previous month's revised 1.63%. Today's release included revisions back to January 2013.

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The Q Ratio and Market Valuation: July Update

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August 1st, 2016

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies.

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Is the Stock Market Cheap?

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August 1st, 2016

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

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Crestmont Market Valuation Update

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August 1st, 2016

Quick take: Based on the July S&P 500 average of daily closes, the Crestmont P/E is 94% above its arithmetic mean and at the 98th percentile of this fourteen-plus-decade monthly metric.

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ISM Manufacturing Index: Continuing Expansion in July

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August 1st, 2016

Today the Institute for Supply Management published its monthly Manufacturing Report for July. The latest headline PMI was 52.6 percent, a decrease of 0.6 percent from the previous month and below the Investing.com forecast of 53.0.

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Regression to Trend: The Latest Look at Long-Term Market Performance

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August 1st, 2016

Quick take: At the end of July the inflation-adjusted S&P 500 index price was 87% above its long-term trend, up from 82% the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

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The Four Totally Bad Bear Recoveries: Where Is Today's Market?

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July 31st, 2016

This chart series features an overlay of the Four Bad Bears in U.S. history since the equity market peak in 1929. They are:

  1. The Crash of 1929
  2. The Oil Embargo of 1973
  3. The 2000 Tech Bubble bust and,
  4. The Financial Bubble and Crisis.

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Chicago PMI Down Slightly in July

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July 29th, 2016

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, was down slightly in July to a value of 55.8 from last month's 56.8, it's highest since January 2015. Values lower than 50.0 indicate contracting manufacturing activity.

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Regional Fed Manufacturing Overview: July Remains Negative

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July 28th, 2016

The Federal Reserve System consists of twelve Federal Reserve Banks, twenty five branches, and the Board of Governors in Washington, D.C. Each bank serves a larger regional district. Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The average of the five for July is -3.4, unchanged from last month's -3.4.

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Home Ownership Rate At New Interim Low

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July 28th, 2016

Over the last decade the general trend has been consistent: The rate of home ownership continues to decline. The Census Bureau has now released its latest quarterly report with data through Q2 2016. The seasonally adjusted rate for Q2 is 63.1 percent, down slightly from 63.5 in Q1. The nonseasonally adjusted Q2 number is 62.9 percent, below the Q1 number and at its interim low.

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Pending Home Sales Rise Marginally in June

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July 27th, 2016

Today the National Association of Realtors released the June data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales were mostly unmoved in June, but did creep slightly higher as supply and affordability constraints prevented a bigger boost in activity from mortgage rates that lingered near all-time lows through most of the month. Increases in the Northeast and Midwest were offset by declines in the South and West."

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Home Prices Rose 5.1% Year-over-Year, Increases Ease in May

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July 26th, 2016

With today's release of the May S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were down -0.1% month over month. The seasonally adjusted year-over-year change has hovered between 4.4% and 5.4% for the last twelve months.

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Consumer Confidence Held Steady in July

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July 26th, 2016

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 14. The headline number of 97.3, was slight decline from the June final reading of 97.4 in June Today's number was above the Investing.com consensus of 95.9.

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Dallas Fed Manufacturing Outlook: Activity Stabilizes in July, Outlook Improving

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July 25th, 2016

This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for July. The latest general business activity index increased in July, up 17 points, coming in at -1.3, up from -18.3 in June. Other measures of manufacturing activity reflected increasing and improving conditions.

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NYSE Margin Debt and the Market

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July 25th, 2016

Note: The NYSE has released new data for margin debt, now available through June. We've updated the charts in this commentary to include the latest numbers.

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is down 0.8% month-over-month, the second consecutive month of decline, but it is still off its interim low set in February. This metric is well below its record high set 14 months ago in April of last year.

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Best Stock Market Indicator Update

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July 22nd, 2016

According to this system, the market is now tradable and a signal to enter and continue all long trading. The OEXA200R is at 84% and all three secondary indicators are positive.

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Real Median Household Income Up Slightly in June

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July 21st, 2016

The Sentier Research median household income data for June, released this morning, came in at $57,206. The nominal median rose $353 month-over-month and is up $1,991 year-over-year. In percentages, the June number is up 0.6% MoM and 3.6% YoY. Adjusted for inflation, the latest income was up $231 MoM and $1,408 YoY. The real numbers equate to increases of 0.4% MoM and 2.5% YoY.

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Secular Trends in Employment: Goods Producing Versus Services Providing

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July 13th, 2016

The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. At the highest level, all jobs are divided into two categories: Service-Providing Industries and Goods Producing Industries. The adjacent chart illustrates the ratio of the two categories since 1939.

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A Perspective on Secular Bull and Bear Markets

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July 4th, 2016

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, seven years later, the S&P 500 has set an inflation-adjusted record high.

Let's examine the past to broaden our understanding of the range of historical trends in market performance. An obvious feature of this inflation-adjusted series is the pattern of long-term alternations between up-and down-trends.

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Moving Averages: Month-End Preview

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June 29th, 2016

Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. Four of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), iShares' Barclays 7-10 Year Treasury (IEF), PowerShares DB (DBC) and Vanguard REIT Index ETF (VNQ), — are signaling "invested", changed from last month's all invested signal.

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Brace Yourself: Our Latest Look at Student Debt

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June 13th, 2016

College Tuition and Fees constitute one of the biggest threats to our economic outlook. Here is a chart of data from the relevant Consumer Price Index sub-component reaching back to 1978, the earliest year Uncle Sam provides a breakout for College Tuition and Fees. As an interesting sidebar, we've thrown in the increase in the cost of purchasing a new car as well as the more substantial increase for the broader category of medical care, both of which pale in comparison.

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The Fed's Financial Accounts: What Is Uncle Sam's Largest Asset?

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June 13th, 2016

Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset in Uncle Sam's financial accounts?

  • A) U.S. Official Reserve Assets
  • B) Total Mortgages
  • C) Taxes Receivable
  • D) Student Loans

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Household Net Worth: The "Real" Story

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June 9th, 2016

Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth at an all-time high — 61.2% above the 2009 trough and 20.1% above the 2007 peak. The nominal Q1 net worth is up 0.9% from the previous quarter and 1.3% year-over-year.

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49 Years of Income and Home Values

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May 25th, 2016

Often conversations about home buying end up in discussions on the high cost of homes today and their affordability – or lack thereof. We decided to take a look at the long-term trends in home prices in comparison to income and found that incomes have been stagnant since the early 1970s, while home prices have risen dramatically in comparison.

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Equity Valuations, Recessions and Stock Market Declines

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April 12th, 2016

Note: In response to an email, I've updated the data in this article through the March month-end numbers and at the launch of the Q1 2016 earnings season.

Last year I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the adjacent chart, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:

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Industrial Production: Those Ugly Annual Benchmark Revisions and the Heightened Risk of Recession

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April 4th, 2016

The big economic news on Friday was the Department of Labor's Employment Report for March. The mainstream press focused on two numbers: the 215K new jobs and the 5% unemployment rate. Over the next few days we'll dig in a bit deeper to look at some of the underlying employment demographics, which in many ways give a greater understanding of employment conditions. But the much more significant economic news on Friday was the Federal Reserve's noon release of the disturbingly negative annual benchmark revisions to Industrial Production.

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Weekly Heating Oil Price Update: US Average Unchanged, Last Update of Season

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March 30th, 2016

The latest price for home heating oil nationwide is $2.13 per gallon, unchanged from last week. This season, heating oil prices on average have dropped 29 cents per gallon in the US. With winter at a close, we are at the end of the heating oil season. This year's winter was warmer than average and saw a continued drop in heating oil prices, but with a slight uptick toward the season close. The end-of-season jump in prices reflects the crude oil uptick we've seen recently.

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Another Look at the Total Return Roller Coaster

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January 11th, 2016

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $17,357 for an annualized real return of 11.08%.

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Household Incomes: The Value of Higher Education

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October 19th, 2015

What is the value of education for household income? The Census Bureau's annual survey data for 2014 published last month gives us some interesting insights into this question. The median income for all households with a householder age 25 and older was $55,283. The chart below shows the median annual household income for nine cohorts by educational attainment. We've rounded the data points to the nearest $100, e.g. $55.3K for all households.

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Household Incomes: The Decline of the "Middle Class"

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October 13th, 2015

The median household is the statistical center of the Middle Class. In terms of income, this class has not fared well in recent decades. Let's take a closer look at a troubling aspect of the Census Bureau's latest annual household income data, issued last month. In this update we'll focus on the growing gap between the median (middle) and mean (average) household incomes across the complete time frame of the Census Bureau's annual reporting, which began in 1967, to the release last month of the annual data for 2014.

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Household Incomes Across Time: The Divergence at the Top

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October 7th, 2015

Among the most interesting of the long-term economic indicators we track is the Census Bureau's annual data on the mean (average) household income received by each fifth (quintile) and top 5 percent. See our latest update here. A conspicuous pattern in the series is the widening of the spread in income growth that started during the 1980s.

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Median Household Income Growth: Deflating the American Dream

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September 23rd, 2015

What is the single best indicator of the American Dream? Many would point to household income growth. The Census Bureau has now published some selected annual household income data in a new report: "Income and Poverty in the United States: 2014". Last year the median (middle) household income was $53,657 — a 0.13% year-over-year increase that shrinks to -1.48% when adjusted for inflation. Let's put the new release into a larger historical context.

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Median Home Price and Salary Required in 27 Major Cities

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September 23rd, 2015

Tim Manni, the Managing Editor at HSH.com, features a periodic update entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The key question is:

"How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?"

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Median Household Purchasing Power for the 50 States and DC

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September 22nd, 2015

Last week we posted an update on the median household income by the 50 states and DC based on the Current Population Survey, a joint undertaking of the Census Bureau and Bureau of Labor Statistics, which includes annual data from 1984 to 2014. Let's now look at the actual purchasing power of those median incomes. For this adjustment we're using the "C2ER Cost of Living Index" produced by C2ER, the Council for Community and Economic Research.

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Median Household Income by State: A New Look at the Data

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September 18th, 2015

The Census Bureau's annual household income reports for 2014 is now available. We've now compiled a few tables for the 50 states and DC based on the Current Population Survey, a joint undertaking of the Census Bureau and Bureau of Labor Statistics, which includes annual data from 1984 to 2014. The details are fascinating.

First, some context. The median US income in 2014 was $53,657, up from $22,415 in 1984 -- a 139.4% rise over the 30-year time frame.

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Median Household Incomes by Age Bracket: 1967-2014

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September 17th, 2015

Earlier today we updated our commentary on household income distribution to include the Census Bureau's release of the 2014 annual data. Our focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 46-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes. But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time.

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U.S. Household Incomes: A 47-Year Perspective

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September 17th, 2015

The Census Bureau has now released its annual report household income data for 2014. This update features an analysis of the quintile breakdown of data from 1967 through 2014 along with the statistics for the top 5%.

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