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Dear Client, Next week on November 26th instead of our regular weekly publication you will receive our flagship publication “The Bank Credit Analyst” with our annual investment outlook. Our regular publication service will resume on December 3rd with our high-conviction trades for 2019. Kind…

Neutral We have been riding the rails juggernaut for roughly 16 months, but the time has come to get off board. As shown in the chart at the side, technical conditions are overbought and relative valuations are pricey, hovering near previous extremes as investors are extrapolating good times…

Highlights Portfolio Strategy Overbought technicals, pricey valuations, decelerating global growth, declining capex, rising indebtedness and softening operating metrics argue for hopping off the S&P railroads index. Rising refined product stocks, ebbing gasoline demand, and excessive…

  Overweight (High-Conviction) We have written frequently about trade tensions keeping a lid on trade-exposed sectors, with the S&P air freight index chief among them. As such, we have been anticipating a rally following the recent signing of the USMCA, negotiations over which had…

Underweight - Upgrade Alert The S&P airlines index has been buffeted by headwinds arising from the increasing cost of jet fuel; as the top panel of our chart shows, the price of jet fuel is the single largest driver of airline relative stock performance. In an environment where nearly all…

  Overweight Rail stocks in general, and Union Pacific (UNP) in particular, got a major lift yesterday when UNP announced a plan to implement the principles of Precision Scheduled Railroading (PSR) in its push to improve customer deliveries and profitability. Recall that PSR was…

  Overweight (High Conviction) Our attention in the last several months has been focused on rising trade tensions and the threat they present to our bullish cyclical equity bent. One sector that has seen a particular increase in volatility resulting from the swinging trade sentiment is…

Sentiment Is Taking Off Overweight (High Conviction) The S&P air freight index has been rebounding this month after being buffeted by the headwinds of a potential trade war. UPS has been the leader upwards after reporting steeply higher quarterly sales as yields have strengthened…

Underweight The S&P airlines index got a rare respite last week when United Airlines reported strong results and, perhaps more importantly, scaled back capacity growth plans. Regarding the latter, recall that earlier this year the company had announced a significant expansion, triggering…