Weekly Market Notes Please refer to Appendix – Important Disclosures
Transcription
Weekly Market Notes Please refer to Appendix – Important Disclosures
Baird Market and Investment Strategy Weekly Market Notes November 17, 2014 Dow Industrials 17634 S&P 500 2039 Please refer to Appendix – Important Disclosures Growing Optimism/Short-Term Headwind Summary Stock prices grinded higher last week supported by improving economic Economy: This week’s PPI and CPI reports expected to show inflation falling 0-1% in October. fundamentals, low inflation and favorable seasonal trends. The plunge in gasoline prices is encouraging consumers as evidenced in the latest Reuters/University of Fed Policy: Falling commodity prices expected Michigan Consumer Sentiment Survey that climbed to the highest level since July to keep the Fed sidelined on a rate hike in 2015. 2007. Since the second quarter, oil prices have dropped 29%. Last week witnessed another steep drop with spot oil trading below $75 for the first time in Sentiment: Investor psychology moving closer four years. The decline in energy prices is slowly working its way through the to extreme optimism. economy with holiday retail spending expected to be robust. However, the Strongest Sectors: Health care, consumer dramatic plunge in oil prices also carries negative implications for the U.S. staples and technology strongest sectors – economy. The energy complex has been responsible for many of the betterConsumer discretionary lags despite drop in gas paying jobs the past four years and has accounted for much of the strength in the prices. U.S. economy. Inflation expectations are falling as fast as the decline in oil prices. This likely trumps the negative implications lower energy prices have on the oil companies. The decline in commodity prices suggests interest rates will remain low for much longer and continue to offer significant support for the equity markets deep into 2015. The stock market, from a seasonal perspective, is poised for further gains in 2014 and 2015. Very short term, however, stocks enter the new week overbought and overbelieved. This raises the likelihood for a pause in the November rally. Any weakness, however, is expected to be limited in both time and price. December is one of the strongest months of the year for equities. This could be attributed, in part, to the fact that investors delay selling winning positions late in the year in order to postpone the tax liability. January typically is a good month for stocks as new money flows into retirement accounts. Looking further out, seasonal trends often produce equity outperformance the year before a presidential election. Finally, going back a century or more, years ending in ‘5’ are almost always an up year for stocks. Sentiment Current Previous Indication CBOE 10-Day Put/Call Ratio Below 80% is bearish; Above 95% is bullish 92% 95% Neutral CBOE 3-Day Equity Put/Call Ratio Below 53% is bearish; Above 64% is bullish 57% 61% Neutral VIX Volatility Index Below 16 is bearish; Above 21 is bullish 13.3 14.0 Bearish American Association of Individual Investors Twice as many bulls as bears is bearish; more bears than bulls is bullish Bulls: Bears: 57.9% 19.3% Bulls: Bears: 52.7% 15.1% Bearish Investors Intelligence (Advisory Services) 55% bulls and/or less than 16% bears is considered bearish Bulls: Bears: 55.5% 14.8 % Bulls: Bears: 54.6% 15.1 % Bearish National Assoc. of Active Investment Mgrs. (NAAIM) Below 30% is bullish; Above 80% is bearish 85% 78% Bearish Ned Davis Research Crowd Sentiment Poll Extreme Optimism Extreme Optimism Bearish Ned Davis Research Daily Trading Sentiment Composite Excessive Optimism Pessimism Fading Bearish Bruce Bittles Chief Investment Strategist [email protected] 941-906-2830 Weekly Market Notes RS Ranking RS Current Previous Trend Health Care 1 ** 1 Consumer Staples 2 ** 5 Information Technology 3 ** 4 Financials 4 ** 3 Utilities 5 ** 2 Industrials 6 6 Telecom Services 7 9 Sub‐Industry Detail Leaders: Laggards: Leaders: Laggards: Leaders: Laggards: Leaders: Laggards: Leaders: Laggards: Leaders: Laggards: Leaders: Laggards: Leaders: + Consumer Discretionary 8 7 Materials 9 8 Leaders: Laggards: Energy 10 10 Leaders: Laggards: Laggards: HC Distributors; Managed Health Care; Biotechnology Drug Retail; Food Retail Personal Products Data Processing & Outsourced Services; Home Entertainment Software IT Consulting & Other Services Residential REITs; Real Estate Services Human Resources & Employment Services; Airlines; Railroads Construction & Engineering; Electrical Components & Equipment; Trading Companies & Distributors; Security & Alarm Services Homebuilidng; Household Appliances; Footwear; Distributors; Home Improvement Retail; Automotive Retail Automobile Manufacturers; Leisure Products; Casinos & Gaming; Broadcasting; Publishing; Internet Retail Aluminum; Paper Products Commodity Chemicals; Diversified Metals & Mining; Gold; Steel Oil & Gas Drilling; Oil & Gas Equipment & Services; Integrated Oil & Gas; Oil & Gas Exploration & Production ** Denotes Current Relative Strength‐Based Overweight Sectors ** 1 ranking = strongest sector – 10=ranking weakest sector Monthly Data 11/30/1952 - 11/30/2014 Components of the Reuters/University of Michigan Consumer Sentiment Index 115 110 105 100 95 90 85 80 75 70 65 60 55 50 120 11/30/2014 = 89.4 Consumer Sentiment Index Source: Haver Analytics, University of Michigan, NDR estimates prior to 1978 11/30/2014 = 103.0 Current Conditions Index 115 110 105 100 95 90 85 80 75 70 65 60 55 50 120 110 110 100 100 90 90 80 80 70 70 60 60 Shaded areas represent National Bureau of Economic Research recessions dates. 50 50 105 100 95 90 85 80 75 70 65 60 55 50 45 105 100 95 90 85 80 75 70 65 60 55 50 45 Consumer Expectations Index 11/30/2014 = 80.6 (E0132) 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Copyright 2014 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html . For data vendor disclaimers refer to www.ndr.com/vendorinfo/ . Source: Ned Davis Research Robert W. Baird & Co. Page 2 of 3 Weekly Market Notes Appendix – Important Disclosures and Analyst Certification This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. ADDITIONAL INFORMATION ON COMPANIES MENTIONED HEREIN IS AVAILABLE UPON REQUEST The indices used in this report to measure and report performance of various sectors of the market are unmanaged and direct investment in indices is not available. Baird is exempt from the requirement to hold an Australian financial services license. Baird is regulated by the United States Securities and Exchange Commission, FINRA, and various other self-regulatory organizations and those laws and regulations may differ from Australian laws. This report has been prepared in accordance with the laws and regulations governing United States broker-dealers and not Australian laws. Copyright 2014 Robert W. Baird & Co. Incorporated Other Disclosures UK disclosure requirements for the purpose of distributing this research into the UK and other countries for which Robert W Baird Limited holds an ISD passport. This report is for distribution into the United Kingdom only to persons who fall within Article 19 or Article 49(2) of the Financial Services and Markets Act 2000 (financial promotion) order 2001 being persons who are investment professionals and may not be distributed to private clients. Issued in the United Kingdom by Robert W. Baird Limited, which has an office at Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB, and is a company authorized and regulated by the Financial Conduct Authority. For the purposes of the Financial Conduct Authority requirements, this investment research report is classified as objective. Robert W Baird Limited ("RWBL") is exempt from the requirement to hold an Australian financial services license. RWBL is regulated by the Financial Conduct Authority ("FCA") under UK laws and those laws may differ from Australian laws. This document has been prepared in accordance with FCA requirements and not Australian laws. Robert W. Baird & Co. Page 3 of 3