EARNINGS WATCH
So far, so good!
- Thus far this season, companies are posting top-line beats of 1.1%. This is in contrast to disappointing results in the prior three quarters.
- 82 companies (23.2% of the S&P 500’s market cap) have reported. Earnings are beating by 6.5% while revenues are surprising by 1.1%.
- Expectations are for a decline in revenue, earnings, and EPS of -1.1%, -5.3%, and -2.9%.
- EPS is on pace for +2.1%, assuming the current beat rate for the remainder of the season. This would be +6.3% excluding Energy and the Big-5 Banks. (RBC)
The earnings beat rate is 70%.
Thomson Reuters’ data show Q2 EPS down 3.8%.
Yet on a bigger scale, all that’s just noise blocking the signal that the global economy is less volatile than any period in the modern era. This is the conclusion of new research led by David Hensley, director of global economics at JPMorgan Chase & Co. in New York.
Hensley’s work measures standard deviations of quarterly, annualized gross domestic product growth for major developed and emerging markets, plus a selection of regions. The sample compares the middle of the business cycle leading up to the Great Recession with the middle of the next cycle, i.e 2013 to 2016.
The findings show that whereas some big economies, like the U.S. and Japan are marginally more volatile now than they were during the admittedly very calm “Great Moderation,” others are much less so. The net effect is a global growth pattern less bumpy than any time since 1970. (…)
The U.S. Federal Reserve, the European Central Bank and the Bank of Japan have all found themselves shifting policy in response to risks coming from abroad. From once being purely domestic inflation targeters, they’re now global risk managers.
“Yes doctor, the patient is very calm. Should I give him more morphine?”
Even though (via The Daily Shot):
SENTIMENT WATCH
Via The Daily Shot:
1. In US equity markets, the financial Blogger sentiment is most bullish since 2012.
Source: @hmeisler
2. Continuing with the “frothy markets” theme, here is CNN’s Fear & Greed Index.
Source: CNN Money
3. VIX closed below 12 for the first time in a year.
Source: @barchart
4. While it’s tempting to go long vol at these levels, VIX futures contango (roll-down the curve) can be extremely painful for longer-term net-long VIX holders.
Source: Ycharts.com
5. The VIX curve is fairly steep, indicating increased risk appetite.
Source: Ycharts.com
6. Despite the “frothy market” indicators (above), the Merrill Lynch fund manager survey suggests managers are highly risk averse.
Source: @NickatFP
Source: @NickatFP
The beginning of the third quarter signalled worsening operating conditions in the Japanese manufacturing sector. Both production and new orders declined, albeit at weaker rates than seen in June. Meanwhile, international demand fell at the sharpest rate in over three-and-a-half years, with many panellists blaming the appreciation of the yen leading to a reduction in global competitiveness. On a more positive note, the stronger yen/dollar rate helped to ease inflationary pressures as input prices decreased at the fastest rate since November 2009. Jobs growth also picked up, although was marginal overall.
