Proxy metrics for financial conditions from the US dollar, to interest rates to corporate bond spreads have been loosening since June and suggest continued moderate economic growth in the second half of 2017 and a firm equity market.
By most accounts the Q2 earnings reporting season has been a good one, with most companies surprising to the upside and some offering improved guidance for future numbers. In fact, according to FactSet, more companies have posted a positive sales surprise in Q2 than any quarter going back at least five years.
As our regular readers are aware, we’ve been pounding the table all year arguing that foreign stocks are in a position to structurally outperform domestic stocks. At the risk of sounding like a broken record, we thought we would – in one post – review the setup that makes foreign equities relatively attractive at this juncture.
It’s news to no one that energy has been the worst performing sector year to date with plenty of hatred of the sector to go around. Yet, as we write the price of WTI crude oil is up about 2% on news of capex cuts and OPEC’s apparent moves to reign in production and exports.
The financial sector has been getting a lot of attention recently with earnings announcements so we thought we’d weigh in on one aspect of financial stock relative performance that is making it difficult for financials to truly lead this market higher: the flattening yield curve.
The USD is weak again today and plunging lows not seen for 15 months. The “obvious” reasons for the USD weakness include converging foreign economic activity, more hawkish foreign monetary policies, and a general overvaluation of USD.
It’s been awhile since we’ve weighed in on the active/passive debate so we thought we’d toss our hat in the ring yet again and try to explain the asset migration that is taking the fund management industry by storm.
Highlighting the deteriorating trend in Chinese corporate financials has been an annual feature our of this blog.
Today’s payroll beat of 222,000 nonfarm jobs being added to the economy in June should be viewed in a larger context of overall slowing employment statistics that all point to the US economy remaining in its relatively weak and slowing trend.
With the euro up another 50bps today against the USD, we thought it timely to review some fundamental factors that should act to support the longer-term trend higher in the euro.