Blaine Rollins

361 Capital Weekly Research Briefing: They Walk the Line...

 

The press continues to write stories of the billionaires’ bearish views on the financial markets. I have no idea if a bond or a stock market crash is close at hand but every time one of them appears in the press or pens a bearish note, I get a few emails asking if now is the time to sell everything. I try to consistently respond with comments noting how the billionaire has valid points, but that it is typically wise to keep a diversified investment portfolio and avoid trying to ‘all or nothing’ time the markets based on what they have seen or read. Even the billionaire market timers themselves will tell you how difficult it is to call the tops (and even the bottoms).

I find it much easier to watch the markets for developing trends and then invest in those ideas that have good fundamentals and a basis for further future buying by other investors. After two to three years of mostly trendless equity markets, 2016 does appear to be providing us with some new and interesting trends in sectors, geographies and asset classes that have been roughed up during the last investment cycle. I don’t mind if the new trends appear because of changes in global economic activity, changes in central bank actions, changes in specific sector demand or just extreme price movements. I just want to find moving investor perceptions and position my investments ahead of those perceived changes. Digging and transporting iron ore in Brazil was a great business that investors tripped over themselves to own back in the mid 2000’s. Today that same chart looks like the Dow Utilities or the U.S. Real Estate ETF. The market will usually move in small, medium and big cycles. Find the time frame that is appropriate for you and add chips to those asset trends that are improving, while funding them with the assets that are expensive, extended and falling out of favor.

Now to the markets, Friday’s job report was strong enough to abate worries over the consumer economy. If only companies would start spending we could really start dialing up GDP growth expectations and give the Fed something to do…

The three-month average job gain is now running at about 190,000, suggesting that payroll growth can easily continue in the range of 120,000 to 150,000 in the months ahead — ample to compensate for natural growth in the labor force and also bring more people back into the labor force…

Adding to the robust job creation, the average hourly wage increased by 0.3 percent in July, a bit faster than expected. Together with a slight extension of the average work week, this puts more money in the pockets of U.S. households. This bodes well for consumer spending, which still comprises the most important component of the economy, suggesting that the U.S. is in relatively good shape to resist the growth slowdown afflicting other countries.

( Bloomberg )

With the bulk of the corporate earnings season now behind us, it looks as if the earnings beats will end up being the highest in five years…

More than 2,000 companies have reported earnings since the Q2 reporting period began on July 11th. Of these 2,000+ reports, 65% posted EPS numbers that were stronger than consensus analyst expectations. That’s a strong reading relative to past earnings seasons over the last five years.

Below is a look at earnings beat rates by sector this season. As shown, the strong overall beat rate of 65% has been driven by Technology, Industrials and Health Care. A whopping 74% of Tech stocks have beaten consensus analyst EPS estimates. Now you know why the sector is on fire lately! The Industrials sector beat rate is at 67%, while it’s 66% for Health Care.

( Bespoke )


I would have titled it… “Look Inside! Positive Yields!”

( Barron’s )

To read the 361 Capital Weekly Research Briefing in its entirety, please visit:  http://hvst.co/2b5CqAz 
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