The latest Chinese CPI and PPI readings were released today and showed the lowest year-over-year change in CPI since 2009 and yet another negative PPI reading (chart 1).
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We suspect pegging short-term interest rates at zero for years has something to do with the fact that, for as far back as we have data, there have never been fewer stocks selling at a discount to book value. Importantly, this is a global phenomenon.
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Several financial market commentators have recently been making the case for EM Asian stocks based on their valuation level. One of the commonly used charts is the first one below, which shows the forward 12-months price to cash flow valuation for EM Asia relative to North America.
Read MoreThe drop in oil prices has brought up a few questions with respect to who will benefit and who will be negatively impacted. There are regional PMI surveys and Federal Reserve surveys that can help fill in some of the gaps. For example, below is the Dallas Fed New Orders index and the Houston PMI.
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Recent US economic data has been disappointing. While perhaps statistical noise, more weak signs continue to mount. Let’s start with the durable goods orders reported recently. The headline stat is a very volatile series because aircraft and/or military orders can be quite lumpy.
Read MoreLast week we wrote a few posts here, here and here noting the significant deterioration in EPS and sales growth estimates over the last few months.
Read MoreTo say that Greek banks are underperforming is more than a gross understatement of fact. The visual representation of that performance, however, is really quite stunning.
Read MoreImagine you had a plain vanilla $1 million equity portfolio that was solely invested in the S&P 500 and you were starting to feel a little nervous about stocks because of high valuations or deteriorating earnings estimates. How would you go about protecting yourself if stocks began to decline in earnest?
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Markit’s PMI Manufacturing survey data released today showed little change in euro area countries’ headline readings, as most continued to hover around the all-important 50 level: The largest monthly improvement was in France (~2 points) while Ireland’s survey fell the most (~2 points), and no country came close to the three-point move posted by Austria
Read MoreOur basic proxy for global inflation continues to fall further. The year-over-year change of the CPI of 33 countries (using a simple average) has fallen for eight straight months and now sits at just 1.42%.
Read MoreThe Barclays US Aggregate Treasury total return index is up nearly 6% year-over-year. This index has a modified duration of 5.75 years. Not a bad return considering the on-the-run 5-year treasury is currently yielding 118 basis points.
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Looking across the global equity markets, it is clear that an asset allocation approach based on sector exposures has worked better than any geographic allocation. In particular, an overweight allocation to the health care sector would have benefited portfolios tremendously.
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With the highest productivity in Europe, a sizeable current account surplus and rock bottom interest rates, is there a case to made for German equities? Germany’s competitiveness, export performance and trade surplus should increase as the Euro weakens helping German exporters in markets outside of the Euro bloc.
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Without delving into the multitude of reasons for the drop, we just point out that EPS estimates for next twelve months are falling like a stone in North America and Europe and for these two regions the bottom line estimates point to the lowest growth rate since late 2009.
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The likelihood of a country leaving the euro zone rose once again, according to sentix’s Euro Break-Up Index (EBI).
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