Saturday, April 27, 2019

This Week's Message: Still A Mixed Picture

I think the best way to describe my current read on the vast array of economic and market-related data that we track week in and week out is (as it was a month ago) simply "mixed".

In terms of the economy, our economic subindex (within our PWA Macro Index) shows capital investment (business expansion) and chemical activity (early stage manufacturing supply chain stuff) picking up, while truck tonnage (stuff moving across the nation's roads), Citigroup's Emerging Markets Econ Surprise Index and the Bloomberg Commodity Index are rolling over a bit. The subindex's other 47 data points remain a mix of red, yellow and green, netting an overall low (frankly) score of +9.62. The bad news is that when we rewind to January 15 of last year, the same mix of data scored a +88.37 (yes, while there's still no recession on the near-term horizon, things have deteriorated markedly over the past year+). The good news is that this week's +9.62 is way better than the somewhat worrisome +1.92 the subindex scored just a few weeks ago (April 1st).

Our financial stress subindex came in unchanged at a very comfortable +72.7 (this indicator was bleeding red leading into the past two bear markets [-62.5 and -66.7 respectively]).

As for financial market indicators, individual investors were a little less bullish last week (that's good!), while sector performance (cyclical versus economically-defensive sectors) was uninspiring -- with healthcare and utilities capturing the week's 1 and 3 best-performing spots, while industrials, materials, commodities and energy, in that order, were the 4 worst performers. A couple of breadth indicators (measure the extent to which all boats are rising with the tide) legged lower as well.

Per our video commentaries, I also monitor a number of other indicators and market-related data points outside of our formal weekly assessment that give me a feel for near-term probabilities and serve to help me influence client near-term expectations as well as instruct me as to entry points for allocating new capital.

While my "mixed" characterization has me sounding a near-term cautious tune, as for macro conditions in the aggregate, they remain supportive of our present bias toward the cyclical sectors.

In the first video below (from last Thursday) I feature three of the indicators/developments that inspire my near-term cautiousness (although the first one reversed [positively] on Friday). My general conditions assessment -- which instructs our long-term allocation decisions -- today is virtually the same as it was when (April 13th) we produced the second video below (from the 2:30 point on):

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Have a nice weekend!

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