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Dr. Ed Yardeni

Dr. Ed Yardeni

Dr. Ed Yardeni is the President and Chief Investment Strategist of Yardeni Research, Inc., a provider of independent investment strategy and economics research for institutional investors. In this blog, we highlight some of the more interesting relationships and developments that should be of interest to investors. Our premium research service is designed for institutional investors.

Articles by Dr. Ed Yardeni

Message to Buffett: Thanks a Million!

17 days ago

Among the various stock market valuation gauges, Warren Buffett has said he favors the ratio of the value of all stocks traded in the US to nominal GNP, which is nominal GDP plus net income receipts from the rest of the world. The data for the numerator is included in the Fed’s quarterly Financial Accounts of the United States and lags the GNP report, which is available a couple of weeks after the end of a quarter on a preliminary basis. Needless to say, it isn’t exactly timely data.
However, the S&P 500 price-to-forward-revenues ratio (a.k.a. the price-to-sales ratio), which is available weekly, has been tracking Buffett’s ratio very closely. In an interview with Fortune in December 2001, Buffett said: “For me, the message of that chart is this: If the percentage relationship falls

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Janet in Wonderland

25 days ago

Borio vs Yellen. Last Wednesday, Fed Chair Yellen, in her press conference following the latest FOMC meeting, reminded me of Alice in Wonderland. She wondered why inflation remained so curiously low. In the world that she knows, ultra-easy monetary policy should stimulate demand for goods and services, lower the unemployment rate, and boost wage inflation, which would then drive up price inflation.
Since the time Yellen became Fed chair on February 3, 2014 through today, the unemployment rate has dropped from 6.7% to 4.4% (from February 2014 through August 2017). Yet over that same period, wage inflation has remained around 2.5% and price inflation has remained below 2.0%. Yellen expected that by now wages would be rising 3%-4%, and prices would be rising around 2% based on the

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Valuation Debate: Shiller vs. Goldilocks

September 20, 2017

The valuation question has been hanging over the current bull market. Valuation ratios such as price/earnings, price/sales, and market capitalization/revenues are uniformly bearish, showing that stocks are as overvalued as they were just before the tech bubble burst in 2000. On the other hand, valuation measures that adjust for inflation and interest rates, both of which are near record lows, suggest that the market is fairly valued. They are mostly in the Goldilocks range: Not too cold, and not too hot. I have been siding with Goldilocks.
Not surprisingly, Yale Professor Robert Shiller strongly disagrees with Goldilocks. He is issuing dire warnings that stocks are as grossly overvalued as they were in 2000. The man won the Nobel Prize in economics, so he must know something. He won

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Another Seinfeld Episode for Stocks

September 14, 2017

The panic-prone bull market in stocks since 2009 has been less panic-prone. The bull turned a bit anxious again last week as Hurricane Irma threatened to level all of Florida after Hurricane Harvey swamped all of Houston and surrounding areas. Irma did lots of damage, but so have previous hurricanes without any consequences for the US economy and stock market. There was also some lingering anxiety about geopolitical tensions with North Korea. However, for now, the US continues to seek nonlethal options, particularly more UN-imposed trade sanctions. Immediate worries about the US federal debt ceiling vanished last Wednesday, when President Donald Trump cut a deal with congressional Democrats to raise the ceiling for three months and agreed to provide emergency funds for Texas and

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Global Synchronized Growth: Why Now?

September 7, 2017

The global economy is running on all six cylinders. It may not be a global synchronized boom, but it is the most synchronized expansion of economic activity that the global economy has had since the recovery from the 2008/2009 recession. The direction of change can be seen in the titles of the past four issues of the International Monetary Fund’s World Economic Outlook: “Subdued Demand: Symptoms and Remedies” (Oct. 2016), “A Shifting Global Economic Landscape” (Jan. 2017), “Gaining Momentum?” (Apr. 2017), and “A Firming Recovery” (Jul. 2017).
Why is this happening now? The global synchronized expansion may be attributable to the plunge in the price of a barrel of Brent crude oil from a 2014 peak of $115.06 on June 19 to a low of $27.88 on January 20, 2016 followed by the recovery to

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Stocks Are Fundamentally Sound

August 30, 2017

The stock market has been like the Starship Enterprise on “Star Trek.” It continues to “boldly go where no man [or woman] has gone before.” The S&P 500 has been setting new record highs with only two significant corrections since March 28, 2013, when it was 1569.19. It is up 58.5% since the prior bull market record high as of the most recent record high of 2480.91 set on August 7.
In other words, it has been 1,594 days in outer space. During the previous bull market of the 2000s, it was in outer space (i.e., exceeded the previous bull market record high) for only 133 days. Granted, the air is thin in outer space, as measured by various valuation gauges. However, there’s no gravitational pull either, so the Starship S&P 500 can continue to fly as long as it doesn’t run out of rocket

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S&P 500 Earnings: The Shining

August 24, 2017

The earnings recession is over. S&P 500 operating earnings per share were eclipsed by the energy recession from Q4-2014 through Q2-2016, when the Thomson Reuters (TR) measure was flat to down on a y/y basis. Growth resumed during the second half of 2016 and first half of 2017.
The TR measure of earnings rose 10.1% y/y during Q2-2017 to a new record high, while revenues rose 5.7% y/y.
That put the S&P 500 operating profit margin (based on TR data) at a record high of 10.8%. “Ouch” is the sound you just heard from all those reversion-to-the-mean bears, who can go back to sleep. The 52-week forward outlook looks outstanding:
(1) S&P 500 forward revenues per share, which tends to be a weekly coincident indicator of actual earnings, continued its linear ascent into record-high territory

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Four Deuces Scenario

August 8, 2017

While real GDP growth continues to amble along at a leisurely pace of 2.0% y/y, the labor market is sprinting at a fast pace. In the 7/31 Morning Briefing, I described my 2-2-2 economic scenario, with real GDP continuing to grow around 2.0% y/y, inflation remaining at or slightly below 2.0%, and the federal funds rate peaking late next year at 2.00%.
One of my accounts suggested the Four Deuces (2-2-2-2) scenario, adding the unemployment rate to the Three Deuces scenario. The jobless rate was 4.3% during July and could fall to 2.0%, which would be the lowest on record starting in January 1948. The low for this series was 2.5% during April and May 1953. A new record low, even at 2.0%, is conceivable if the Three Deuces scenario, continues to play out. That’s because having slow economic

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Investors Hearing Call of the Wild

August 2, 2017

The Call of the Wild is a short adventure novel by Jack London. It was published in 1903 and set in Yukon, Canada during the 1890s Klondike Gold Rush. The central character of the novel is “Buck,” a large and powerful, but domesticated, St. Bernard-Scotch Shepherd dog. Buck is stolen from his home at a ranch in Santa Clara Valley, California, and sold to be a sled dog in Alaska. He becomes increasingly wild as he is forced to fight to survive and dominate other dogs. By relying on his basic instincts, he emerges as a leader in the pack.
This story seems to portray current developments in the White House and, more broadly, in Washington, DC. It also captures the essence of what we may be starting to see in the stock market. Following the stock market debacles of the early and late

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Summertime Lullaby

July 23, 2017

“Summertime” is the aria in the opera Porgy and Bess (1935) composed by George Gershwin. The song became a popular and much-recorded jazz standard, with more than 33,000 covers by groups and solo performers. During these hot summer days, I sometimes like to listen to Ella Fitzgerald sing: “Summertime, and the livin’ is easy. Fish are jumpin’, and the cotton is high. Oh, your daddy’s rich, and your ma is good-lookin’. So hush little baby, don’t you cry.”
For stock investors, the living has been relatively easy since March 2009, when this great bull market started. It would have been far easier if we all fell asleep since then and just woke up occasionally to make sure we were still getting rich. There have been plenty of reasons to wake up crying. But the bull kept singing a lullaby

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China: The Xi Dynasty’s Debt Extravaganza

July 19, 2017

China’s real GDP rose 6.9% y/y during Q2. During the quarter, it rose 6.7% (saar), which it’s been hovering around since the end of 2013. That’s a slowdown from the 10%-plus pace that was the norm in the years prior to the global financial crisis of 2008 and for a couple of years afterwards. Nevertheless, China’s growth rate is impressive compared to those in most other countries in the world. Even more impressive is how much credit it is taking to prop up China’s growth. Of course, this isn’t impressive in a positive way, since economic growth financed by excessive debt often ends badly.
Nevertheless, I am not among China’s doomsayers. I don’t want to bet against over a billion Chinese people who are mostly hard-working, entrepreneurial, aspirational, and materialistic—kind of like

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Stocks: Still Fundamentally Good

July 10, 2017

The latest ascent into record-high territory for the S&P 500, with historically high P/Es, naturally has raised fears of a correction, or worse. It seems to me that the market is doing a very good job of correcting internally on a regular basis without giving up the high ground. The latest example is the recent selloff in technology stocks and rebound in financial ones. That might continue without triggering a market-wide selloff.
Meanwhile, two of my favorite weekly fundamental stock market indicators continue to support the bull market trend. Here is an update:
(1) My Boom-Bust Barometer (BBB) is simply the ratio of the CRB raw industrials spot price index and weekly initial unemployment claims. It remains in record-high territory, with a whopping y/y gain of 21%.
(2) My Fundamental

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US Corporate Finance: Show Me the Money

July 6, 2017

S&P 500 operating earnings totaled $958 billion over the past four quarters through Q1-2017, with buybacks and dividends accounting for 95% of this total. The dividend payout ratio of the S&P 500 remains around 50%. This implies that corporations are spending all their extra cash on buybacks rather than capital spending and wages.
The problem with this widely circulated myth is that profits are not the same as cash flow. The latter is equal to retained earnings (i.e., after-tax profits less dividends) plus the depreciation allowance. When we add the cash flow plus net bond issuance of nonfinancial corporations (NFCs), the resulting series is more often than not very close to capital expenditures plus buybacks. Here are a few round numbers for 2016 based on data compiled in the Fed’s

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Global Demography: Birth Dearth & Urbanization

June 28, 2017

The Voluntary Human Extinction Movement (VHEMT) was founded in 1991 by Les U. Knight, a high-school substitute teacher who lives in Portland, Oregon. He and his followers believe that human extinction is the best solution to the problems facing the Earth’s biosphere and humanity. The VHEMT website shows that the group’s motto is “May we live long and die out.” Their Facebook page sells tee-shirts declaring: “When You Breed, the Planet Bleeds.” Another declares: “Thank You for Not Breeding.” Sure enough, the pace of human breeding has slowed, but for reasons that have nothing to do with VHEMT.
All around the world, humans are not having enough babies to replace themselves. There are a few significant exceptions, such as India and the continent of Africa. Working-age populations are

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Drowning in Oil

June 21, 2017

OPEC oil producers continue to put a lid on their output in an effort to prop up prices. Yet the price of a barrel of Brent crude oil is back down to $45.89, below its recent high of $57.10 on January 6. That’s comfortably in the $40-$50 price range that I have been expecting for this year. Despite the 76% plunge in the price of oil from June 19, 2014 to January 20, 2016, US crude oil production fell just 12% from the week of June 5, 2015 through the week of July 1, 2016. Since then, it is up 10% to 9.3mbd.
Interestingly, weekly production held up relatively better in Texas and North Dakota than in the rest of the country when total output was declining. However, the rebound in US oil production has been led by the rest of the country, excluding Texas and North Dakota. Could it be that

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Tech Now and Then

June 15, 2017

Is it 1999/2000 all over again for the S&P 500 Information Technology sector? Not so far. Consider the following:
(1) First vs third place. During the bull market from October 11, 1990 through March 24, 2000, the sector soared 1,697.2%, well ahead of the 417.0% gain in the S&P 500 and all the other sectors. During the current bull market, it is in third place with a gain of 379.8% through last Friday.
(2) Market-cap and earnings shares. At the tail end of the bull market of the 1990s, the S&P 500 IT sector’s share of the overall index’s market capitalization rose to a record 32.9% during March 2000. However, its earnings share peaked at only 17.6% during September 2000. This time, during May, the sector’s market-cap share rose to a cyclical high of 22.9%, while its earnings share, at a

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Hannibal Spirits: S&P 500 Climbing Mountains

June 8, 2017

Hannibal, the Carthaginian general, was one of the greatest military
strategists of all times. The city of Carthage in ancient Roman times was in the spot of modern-day Tunis, in Tunisia. Hannibal was so feared by the Romans that a common Latin expression to express anxiety about an impending calamity was “Hannibal ante portas!,” which means “Hannibal is at the gates!” He studied his opponents’ strengths and weaknesses, winning battles by playing to their weaknesses and to his strengths.
One of Hannibal’s most remembered achievements was marching an army that included war elephants over the Pyrenees and the Alps to invade Italy at the outbreak of the Second Punic War. He occupied much of Italy for 15 years but was unable to conquer Rome. A Roman general, Scipio Africanus,

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A Memorable Earnings Season

May 31, 2017

Q1 revenues, earnings, and margins are now available for the S&P 500. Revenues per share dropped 2.7% q/q during Q1. Earnings per share, based on Thomson Reuters I/B/E/S (TR) data, fell 1.3% q/q. So in what sense was the Q1 reporting season “memorable,” as stated in the title of today’s commentary?
For starters, the S&P 500 rose to a new record high of 2415.82 on May 26. The S&P 400 and S&P 600 stock price indexes continued to mark time at their recent record highs. Industry analysts remained upbeat about earnings for this year and next year, as reflected by the record highs in the S&P 500/400/600 forward earnings.
This all happened despite a growing realization that President Trump’s economic agenda is likely to be slowed by Washington’s swampy ways. I came to that epiphany on May

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Valuation: A Less Miserable Measure

May 24, 2017

Almost all valuation multiples are flashing that stocks are dangerously overvalued. Are there any valuation models suggesting that the danger signals might be false alarms? There is one. It shows the inverse relationship since 1979 between the S&P 500 forward P/E and the Misery Index, which is the sum of the unemployment rate and the CPI inflation rate. Let’s have a look at it and compare it to a few of the other valuation indicators:
(1) Misery Index very bullish. During April, the Misery Index was down to 6.6%, near previous cyclical lows. That’s down 6.3ppts from its most recent cyclical peak of 12.9% during September 2011. Over this same period, the forward P/E has risen from roughly 10 to 17, well above its average of 13.8 since September 1978.
The theory is that less misery

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Death by Amazon

May 18, 2017

An anchor store is one of the larger stores in a shopping mall, usually a department store or a major retail chain. Shopping malls were first developed in the 1950s. Their developers signed up large department stores to draw retail traffic that would result in visits to the smaller stores in the mall as well. The anchors usually paid heavily discounted rents.
Amazon is a river in South America. It is the largest one in the world by discharge of water and the longest in length. A piranha is a freshwater fish with sharp teeth and a powerful jaw that inhabits South American rivers, including the Amazon. If you happen to fall off a riverboat steaming down the Amazon, the piranhas will pick your bones clean.
Amazon is also a piranha-like corporation that eats up retailers, particularly the

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Earnings: Small Is Beautiful

May 10, 2017

The money keeps pouring into equity ETFs. The latest data from the Investment Company Institute shows that they attracted $38.1 billion during March, $98.6 billion during Q1, and $198.7 billion since November, when Donald Trump was elected president. Over the past 12 months through March, equity ETFs attracted a record $295 billion. No wonder the S&P 500 is up 7.1% ytd through Tuesday’s close and is just 0.1% below Monday’s record high. It is up 12.0% since Election Day.
Just as impressive, the S&P 400 MidCaps and S&P 600 SmallCaps stock price indexes are up 14.2% and 16.7% since Election Day. The stock market rally since then has been attributable to a combination of higher forward P/Es and increases to record highs in the forward earnings of the S&P 500/400/600. The current bull

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Seinfeld Market: Nothing Bad Happening

May 3, 2017

"The Pitch” is the 43rd episode of the TV sitcom Seinfeld. It is the third episode of the fourth season. It aired on September 16, 1992. In it, NBC executives ask Jerry Seinfeld to pitch them an idea for a TV series. His friend George Costanza decides he can be a sitcom writer and comes up with the idea of “a show about nothing.”
The bull market in stocks since March 2009 has had a fairly simple script too. As a result of the Trauma of 2008, investors have been prone to recurring panic attacks. They feared that something bad was about to happen again, so they sold stocks. When their fears weren’t realized, the selloffs were followed by relief rallies to new cyclical highs and to new record highs since March 28, 2013. Their jitters are understandable given that the S&P 500 plunged 56.8% from October 9, 2007 through March 9, 2009.
From 2009 through 2016, there were four major corrections and several significant scares. I kept track of them and the main events that seemed to cause them. By my count, there were 57 panic attacks from 2009 through 2016, with 2012 being especially anxiety-prone with 12 attacks. (See our S&P 500 Panic Attacks Since 2009.)
From 2010 through 2012, there were recurring fears that the Eurozone might disintegrate. There were Greek debt crises and concerns about bad loans in the Italian banking sector.

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A Happier Global Economy

April 27, 2017

Since late last year, I’ve liked what I’ve been seeing abroad, especially in emerging economies. The latest batch of data out of China was certainly surprisingly strong, though that isn’t surprising given that the country’s central planners still command the economy over there as they see fit. The EU’s economy also has impressed me. Like everyone else, I’ve been concerned about the region’s political drift toward anti-EU populism that could lead to the destabilizing disintegration of the EU and/or the Eurozone. However, that risk seems to have dissipated significantly given the recent successes of the establishment parties that remain in power in Spain and the Netherlands. Italy continues to be ungovernable—so what else is new?—but still committed to the EU.
What about France? Following last weekend’s first-round presidential election, I expect that pro-EU centrist Emmanuel Macron, who was a member of the Socialist Party from 2006-2009, will beat National Front leader Marine Le Pen during the second-round contest scheduled for May 7. As they say in French, “Plus les choses changent, plus elles restent les mêmes.”
Let’s take a tour of the latest developments around the world, shall we?
(1) Commodity prices. The CRB raw industrials spot price index dropped last week to the lowest level since January 9. However, it’s down only 2.4% from its recent high on March 17.

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Driving in the Slow Lane

April 19, 2017

Following the latest reports on housing starts (down 6.8% m/m during March) and manufacturing output (down 0.4% last month), the Atlanta Fed’s GDPNow model showed an increase of just 0.5% (saar) in Q1’s real GDP. As I noted recently, the auto industry is a major soft patch in the economy. Sure enough, auto output fell 3.6% during March. Auto assemblies are down 7.3% over the past five months to 11.1 million units (saar) from last year’s peak of 12.0mu. The weather can be blamed for the drop in housing starts, but not for the weakness in auto sales and production.
There are other soft patches in the economy. For example, the ATA Truck Tonnage Index dipped 1.0% m/m in March, and is up by only 0.7% y/y. In other words, it has stalled at a record high over the past year. Sales of medium-weight and heavy trucks dropped 8.0% m/m in March and 19.0% y/y.
So it comes as no surprise that the Citigroup Economic Surprise Index (CESI) has plunged from a recent high of 57.9 on March 15 to 6.6 on Tuesday. These developments are likely to put pressure on the Fed to hold off on another rate hike for now, and on the Trump administration to move forward with its fiscal stimulus agenda. Treasury Security Steve Mnuchin said on Monday that tax reform might not happen until after the summer. I think the weakness in the economy will prompt a faster response by Washington.

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Back to Slower, Longer Economic Growth?

April 12, 2017

In my meetings with some of our accounts recently, many were skeptical that the strength in the soft data in the US will trickle down to the hard data until the Trump administration actually succeeds in cutting taxes and in boosting infrastructure spending. The soft data consist mostly of surveys of consumers, CEOs, purchasing managers, small business owners, industry analysts, and investors. They all turned remarkably upbeat after Election Day, as I have been monitoring in our new Animal Spirits chart publication.
On the other hand, a few hard-data indicators are downright downbeat. Auto sales totaled 16.6 million units (saar) during March, down from a recent high of 18.4 million units at the end of last year. Payrolls in general merchandise stores have dropped 89,300 over the past five months through March as a result of widespread store closings due to competition from Amazon. Then again, employment in construction, manufacturing, and natural resources rose 175,000 during the first three months of this year. The sum of commercial and industrial bank loans and nonfinancial commercial paper has been flat since the start of the year.

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Bull by the Tail

April 5, 2017

Stock market valuation measures are elevated across the board, for sure. The forward P/E of the S&P 500 is currently 17.7. It is highly correlated with the forward price-to-sales ratio (P/S) of the same stock market index. This valuation metric closely tracks the Buffett Ratio, which is equal to the market capitalization of the entire US equity market (excluding foreign issues) divided by nominal GNP. During Q4-2016, the Buffett Ratio was 1.67, not far below the record high of 1.80 during Q3-2000. The forward P/S rose from 1.58 in early 2016 to a record high of 1.93 in March.
These all are nose-bleed levels. However, they may be justified if Trump proceeds with deregulation and succeeds in implementing tax cuts. His policies may or may not do much to boost GDP growth and S&P 500 sales (a.k.a. revenues). Nevertheless, they could certainly boost earnings.

The risk is that Trump’s victory activated a melt-up mechanism that has nothing to do with sensible assessments of the fundamentals or valuation. Instead, structural market flows may be driving the market’s animal spirits. Consider the following:
(1) Lots of corporate cash is still buying equites. At the end of last week, we updated our chart publications with Q4-2016 data for S&P 500 buybacks. They remained very high at a $541 billion annualized rate.

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Many Happy S&P 500 Revenues

March 29, 2017

The global economy fell into a growth recession from mid-2014 through early 2016. It was caused by a severe recession in the global commodities sector, led by a collapse in oil prices. It was widely expected that the negative consequences of lower oil prices for producers would be more than offset by the positive ones for consumers. That was not the case. The former outweighed the latter because the commodity-related cuts in capital spending overshadowed the boost to consumer spending from lower oil prices. In addition, there was a brief credit crunch in the high-yield market on fears that commodity producers would default on their bonds and trigger a widespread financial contagion.
Now the worst is over for commodity producers, as their prices have rebounded. That’s because they scrambled to reduce output and restructure their operations to be more profitable at lower prices. More importantly, global demand for commodities remained solid. Now with commodity prices, especially oil prices, well below their 2014 highs, consumers are benefitting more than producers are suffering.
Voila! The global economy is showing more signs of improving in recent months. That’s already boosting revenues growth for the S&P 500, and should be increasingly obvious as corporations report their top-line growth rates for the Q1 earnings season during April.

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Age-Old Adages for the Bull Market

March 22, 2017

There are plenty of age-old adages about the stock market that focus on the Fed’s impact on the market. They tend to be cautionary and are recited by old timers who’ve lived through some wicked bear markets and fearsome corrections. The basic message is that the Fed is your friend until it isn’t. Consider the following:
(1) Zweig. Martin Zweig was a highly respected analyst and investor who passed away in 2013. He famously often said “Don’t fight the Fed.” He started his newsletter in 1971 and his hedge fund in 1984. On Friday, October 16, 1987, in a memorable appearance on Wall Street Week with Louis Rukeyser, he warned of an imminent stock market crash. It happened the following Monday, and Zweig became an investment rock star. His newsletter, The Zweig Forecast, had a stellar track record, according to Mark Hulbert, who tracks such things.
In his 1986 book Winning on Wall Street, Zweig elaborated on his famous saying:
“Monetary conditions exert an enormous influence on stock prices. Indeed, the monetary climate—primarily the trend in interest rates and Federal Reserve policy—is the dominant factor in determining the stock market’s major direction. … Generally, a rising trend in rates is bearish for stocks; a falling trend is bullish.

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US Flow of Funds: ETFs Driving Stocks Higher

March 15, 2017

The Fed released its Financial Accounts of the United States with data for Q4-2016 last week. It provides amazingly comprehensive insights into the flow of funds, balance sheets, and integrated macroeconomic accounts of the US financial system. It’s really almost too much information to wrap one’s head around.
To help process it all, we have created a bunch of chart publications over the years that visualize quite a bit of it on our website. The saying that a picture is “worth a thousand words” is attributed to newspaper editor Tess Flanders discussing journalism and publicity in 1911. We have always believed that a chart is worth a thousand data points in a time series. Given our chosen profession, we tend to focus on the data for the equity and debt markets in the Fed’s quarterly statistical extravaganza. Let’s focus on equities:
(1) Supply-side totals. Net issuance of equities last year totaled minus $229.7 billion, with nonfinancial corporate (NFC) issues at -$565.7 billion and financial issues at $269.7 billion. The increase in financials was led by a $283.9 billion increase in equity ETFs, the biggest annual increase on record. The decline in NFC issues reflected the impact of stock buybacks and M&A activity more than offsetting IPOs and secondary issues.
(2) Demand-side total.

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Happy Anniversary: Dancing With the Bulls

March 9, 2017

Anniversaries are usually joyous events. This week marked the eighth anniversary of the bull market. On March 3, 2009, President Barack Obama told us to buy stocks: “What you’re now seeing is profit-and-earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.” On March 6, 2009, the S&P 500 fell to an intra-day low of 666, and never looked back. You might recall (because I’ve reminded you a few times since then) that soon after, I declared that this devilish number was THE low. March 9, 2009 marked the closing low of 676.53. Let’s review some of the accomplishments of the charging bull:
(1) Performance, earnings, and valuation. The S&P 500 is up 249% since March 9, 2009 through yesterday’s close. The forward earnings of the S&P 500 is up 103%. The forward P/E is up 75% (from 10.2 to 17.9).
(2) Blue Angels. Putting all these trends together in our Blue Angels charts shows that the market is certainly flying high. Valuations suggest that stock prices are too high. However, forward earnings for the S&P 500 continues to climb in record-high territory. Furthermore, valuation isn’t too high if President Donald Trump delivers the goodies that he promised, including tax cuts, deregulation, and infrastructure spending.

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