The energy sector has been the hardest hit sector over the past month as well as over the past year. On an equal-weighted basis, the energy sector is down 14.7% over the past month and down 9.7% over the past year.
Read MoreA few weeks ago we discussed how the USD was negatively impacting sales and EPS estimate revisions. The dollar’s rise since then has stalled somewhat which has us wondering if we have seen a bottom in sales and EPS revisions?
Read MoreThe percent of stocks with positive performance for the month of October through last Friday stands at a paltry 15%. Granted, as of last Friday there were ten trading days left in the month, but 15% would the lowest reading since May of 2012 and September of 2011 before that.
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One of the ways we like to dissect equity performance is by taking a valuation factor, such as the price-to-book ratio, and analyzing how the performance of the lowest (i.e. cheapest) price-to-book stocks have performed relative to the performance of the highest (i.e. most expensive) price-to-book stocks.
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Even as stock prices have corrected in recent weeks with only 36% of stocks having positive performance over the last 200 days and the average stock 19% from its one year high, we are reminded that stock valuations are still stretched pretty much everywhere.
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The 31-day standard deviation for the daily price change of MSCI World Index has increased from a 20-year low of 0.27% in July to 0.59%. This puts it at the approximately the average level realized in 2013 but still well below the average levels since 2009.
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The last few days brought another round of rather weak economic readings out of China. We saw total social financing (loans) drop to the lowest growth rate since 2006, measures of inflation turn lower, foreign direct investment decline on a year-over-year basis for the first time since early 2013, and FX reserves fall.
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Initial claims for unemployment insurance fell to just 264K for the week of October 10th. This is the lowest level since April 14th, 2000. The non-seasonally adjusted series is now down 23% year-over-year. This is a positive sign that the US economy isn’t on the brink of a recession.
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One way we measure equity market performance is to compare the performance of stocks to volatility. Simply, we create a ratio of the S&P 500 over the VIX.
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It’s been three years since the global developed stock market has had a meaningful correction (down at least 10%). With the recent pickup in volatility, many of our market internal charts are beginning to look like they did in 2011.
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The bullish action in the treasury bond market continued today with the 10-year yield down another 9bps and the 30-year yield down another 6bps. Bond yields are at levels not seen since the commencing of the ”taper tantrum” in the middle of 2013.
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It seems as if investors and the Federal Reserve woke up on October 1 to realize that a strengthening US Dollar was undoing a lot of the reflationary work that had been achieved during QE.
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While we will have to wait another month or so to see the official results, today’s data releases of both the ZEW Survey (red line) and European Industrial Production (dark blue line) do not bode well for Europe’s Q3 GDP (light blue line) release: On a somewhat brighter note, Europe is set to release restated
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During this recent consolidation stock markets around the world are down anywhere from 5-25% off of their 3-month high (table 1), but there has been a surprising calm in the markets thus far, at least according to some measures.
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Long treasury bond yields in the US fell to another new low on the year today with the 30-year settling at 3.01% and the 10-year settling at 2.28%.
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