Estados Unidos
According to the National Accounts (NIPA) data, margins peaked in 2014 and have since diverged sharply with S&P 500 operating margins. This divergence is difficult to explain fully. NIPA margins are often considered a better measure of underlying U.S.…
The market’s trailing and 12-month forward price-earnings ratios (PER) stand at 20 and 16, respectively, and are still far above their historical averages, especially if one leaves out the tech bubble period of the late 1990s. The same is true of other…
Overweight (High-Conviction) One of the key themes for 2019 we noted in Monday’s Weekly Report is the later stages of the U.S. capex upcycle; we highlight our high-conviction overweight recommendation on the S&P software index, a hold-over from last year, which is levered to this theme. As shown in the top panel, relative capital outlays and the share price ratio are joined at the hip. Software upgrades offer the simplest, quickest and most effective capital deployment, especially when productivity gains ground to a halt. Importantly, leading indicators of overall capex remain upbeat and should continue to underpin software profits (second panel). The recovery in the software price deflator (bottom panel), a proxy for industry pricing power, corroborates the upbeat demand backdrop. With regard to financial statements, software stocks have pristine balance sheets with more cash on hand than debt, which sustains the net debt-to-EBITDA ratio in negative territory. Interest coverage is great at 10x and free cash flow generation is expanding smartly. Bottom Line: Software stocks should remain core tech holdings in equity portfolios; we reiterate our high-conviction overweight recommendation. Please see Monday’s Weekly Report for more details. The ticker symbols for the stocks in this index are: BLBG: S5SOFT - MSFT, ORCL, ADBE, CRM, INTU, RHT, ADSK, SNPS, CTXS, ANSS, CDNS, FTNT and SYMC.
Housing is an important part of the economy, and residential investment could become a problem if it weakens further. Residential activity puts a lot of people to work, directly and indirectly, and drives the consumption of big-ticket items linked to home…
The U.S. economy has been buoyed by pro-cyclical stimulus, whereas Chinese policymakers have created a macro-prudential framework that has impaired the country’s credit channel. This divergence has led to the outperformance of the U.S. economy over the rest…
There are five reasons our geopolitical strategists doubt the sustainability of the truce: Trade imbalance: It is highly unlikely that the trade imbalance between China and the U.S. can be substantively altered over the course of 90 days. The U.S. economy is…
Underweight (High-Conviction) While the probability of a housing recession remains low, we are concerned that too much euphoria is already priced in the S&P home improvement retail (HIR) index, and there are high odds that next year HIR will suffer the same fate as homebuilders did this year (top panel). Thus, we are downgrading the S&P HIR index to underweight and adding it to the high-conviction underweight list for 2019. Fixed residential investment (FRI) as a percentage of GDP is up 50% from trough to the recent peak, whereas relative HIR performance is up 170% in the same time frame. Our worry is that optimistic sell side analysts’ relative profit forecasts will be hard to attain, let alone surpass as FRI is steadily sinking (second panel). Worrisomely, our HIR model has plunged on the back of the wholesale liquidation in lumber prices and rising interest rates (bottom panel). Lumber deflation will prove a profit headwind as building supply Big Box retailers make a set margin on wood products. Bottom Line: Rich valuations will be tough to maintain amidst weak FRI, lower lumber prices and higher interest rates. We downgraded to an underweight position on Monday and added the S&P HIR index to our high-conviction underweight list; please see Monday’s Weekly Report for more details. The ticker symbols for the stocks in this index are: BLBG: S5HOMI - HD, LOW.
President Donald Trump and President Xi Jinping have agreed to freeze additional new tariffs on Chinese exports to the U.S. for three months. This means that as of January 1, 2019, U.S. tariffs on Chinese exports will remain at 10%, and will not jump to 25%.…
The good news is that the balance sheets of U.S. energy companies have improved markedly over the past few years. Rapid productivity gains have allowed shale producers to boost production to record levels without having to incur substantially higher costs. In…
In 2014, the Fed was gearing up to raise rates while other central banks were still in full-out easing mode. The divergence in monetary policies between the U.S. and the rest of the world caused the U.S. dollar to surge. The broad trade-weighted dollar…