Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

REAL-Economics.com

Macroeconomics

-Soaring ISM (PMI 58.2; new orders 64) point to a sharply strengthening US economy in 1H 2018, with scant remaining slack in the labour market. The large proposed corporate tax cut (and smaller, more regressive personal income tax cuts) will boost nominal GDP in 1H 2018, but with inflation rising more than real GDP (which cannot do much better than recent readings without immigration). -With core inflation rising toward 2% YoY by mid-2018, the FOMC is likely to speed up hikes in the Fed Funds…

-Soaring ISM (PMI 58.2; new orders 64) point to a sharply strengthening US economy in 1H 2018, with scant remaining slack in the labour market. The large proposed corporate tax cut (and smaller, more regressive personal income tax cuts) will boost nominal GDP in 1H 2018, but with inflation rising more than real GDP (which cannot do much better than recent readings without immigration). -With core inflation rising toward 2% YoY by mid-2018, the FOMC is likely to speed up hikes in the Fed Funds…

Republican Tax Cuts Will Cause Deficits to Balloon, and Bonds to Sell off Dramatically in 2018

Amareos

Ryan Shea

Thematic (Sector/Industry)

<h2>Summary</h2>The Fed is poised to continue its rate hiking cycle. Reminiscent of earlier bond market conundrums, longer-dated Treasury yields have not risen as many, including numerous Fed officials, anticipated. As a result, the US yield curve has experienced a significant flattening trend, with the difference between 2/10s now down to 60bp.Historically, an inverted yield curve has been a reliable lead indicator of recession in the US. Given President Trump’s pick for Fed Chair, Powell, has intimated…

SummaryThe Fed is poised to continue its rate hiking cycle. Reminiscent of earlier bond market conundrums, longer-dated Treasury yields have not risen as many, including numerous Fed officials, anticipated. As a result, the US yield curve has experienced a significant flattening trend, with the difference between 2/10s now down to 60bp.Historically, an inverted yield curve has been a reliable lead indicator of recession in the US. Given President Trump’s pick for Fed Chair, Powell, has intimated…

The Market Sentimentalist - Get Out Of Jail Free: Thoughts On US Yield Curve Flattening

Economist

Richard Iley

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/039/499/original/Screen%20Shot%202017-11-30%20at%203.35.00%20PM.png?1512018337" class="editor-image img-responsive" data-smartkarma-image-id="39499"></figure><div class="content-highlight">
The second estimate of Q3 GDP, which saw growth revised up to 3.3% SAAR from the 3.1% SAAR advance estimate, provided further evidence of the US economy's strength.
Increased estimates of capex - a theme that we continually stressed - were the main source of the upgrade. Equipment capex is now estimated to have surged by 10.4% SAAR in Q3. Bellwether lead indicators signal that even better is still to come (see <a href="https://www.smartkarma.com/insights/chart-of-the-day-boom-part-2" target="_blank" data-smartkarma-citation="insights:15418">Chart of the Day: BOOM! - Part 2</a>). 
One less-heralded aspect of the US's late-cycle boom…
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The second estimate of Q3 GDP, which saw growth revised up to 3.3% SAAR from the 3.1% SAAR advance estimate, provided further evidence of the US economy's strength.
Increased estimates of capex - a theme that we continually stressed - were the main source of the upgrade. Equipment capex is now estimated to have surged by 10.4% SAAR in Q3. Bellwether lead indicators signal that even better is still to come (see Chart of the Day: BOOM! - Part 2). 
One less-heralded aspect of the US's late-cycle boom…


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul><li>Retail stocks are breaking out en masse from technical bottom patterns, marking the reversal of well-established downtrends. This industry-wide move is visible in the Retail ETF, XRT (below). We view this as a buying opportunity.</li><li>From a Group perspective, many of the stronger breakouts/reversals are visible in: Teenage Retailers, Children’s Apparel Retailers, and Auto Dealers.</li><li>We now view retailers as a market weight, and in today’s report we highlight our favorite technical set-ups, including: AEO, ANF, AN, BBY, BIG, BKE, BURL, CATO, CONN, CWH, DG, DLTH, DLTR, EXPR, GPI, GPS, OLLI, PLCE, ROST, and TIF.</li></ul>

Retail stocks are breaking out en masse from technical bottom patterns, marking the reversal of well-established downtrends. This industry-wide move is visible in the Retail ETF, XRT (below). We view this as a buying opportunity.From a Group perspective, many of the stronger breakouts/reversals are visible in: Teenage Retailers, Children’s Apparel Retailers, and Auto Dealers.We now view retailers as a market weight, and in today’s report we highlight our favorite technical set-ups, including: AEO, ANF, AN, BBY, BIG, BKE, BURL, CATO, CONN, CWH, DG, DLTH, DLTR, EXPR, GPI, GPS, OLLI, PLCE, ROST, and TIF.

U.S. Retailers Are Bottoming -- Add Exposure

The primary trend in U.S. equity markets remains bullish, and the usual suspects continue to lead: growth (Tech and FANG), homebuilders, industrials, etc.  Yet unusually bullish price patterns continue to develop in long-term laggards like energy (esp. E&amp;Ps), retail (XRT), and engineering &amp; construction (JEC).  We view this stabilization, or participation, in weak segments as a boost to the market’s breadth, a point of contention in recent months for some, who have pointed out that fewer stocks are trading above their 200-day moving averages.  Attractive entry points are also visible in many cyclical Groups, especially Casinos and Investment Banks.  In today’s report we highlight actionable charts in both Groups... see pages 8-24]

The primary trend in U.S. equity markets remains bullish, and the usual suspects continue to lead: growth (Tech and FANG), homebuilders, industrials, etc.  Yet unusually bullish price patterns continue to develop in long-term laggards like energy (esp. E&amp;Ps), retail (XRT), and engineering &amp; construction (JEC).  We view this stabilization, or participation, in weak segments as a boost to the market’s breadth, a point of contention in recent months for some, who have pointed out that fewer stocks are trading above their 200-day moving averages.  Attractive entry points are also visible in many cyclical Groups, especially Casinos and Investment Banks.  In today’s report we highlight actionable charts in both Groups... see pages 8-24]

U.S. Equity Weekly: Actionable Ideas in Casinos, Investment Banks

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

Republican Tax Cuts Will Cause Deficits to Balloon, and Bonds to Sell off Dramatically in 2018

-Soaring ISM (PMI 58.2; new orders 64) point to a sharply strengthening US economy in 1H 2018, with scant remaining slack in the labour market. The...

Prasenjit K. Basu

The Market Sentimentalist - Get Out Of Jail Free: Thoughts On US Yield Curve Flattening

SummaryThe Fed is poised to continue its rate hiking cycle. Reminiscent of earlier bond market conundrums, longer-dated Treasury yields have not...

Amareos

Chart of the Day: BOOM! - Part 3

The second estimate of Q3 GDP, which saw growth revised up to 3.3% SAAR from the 3.1% SAAR advance estimate, provided further evidence of the US...

Richard Iley

U.S. Retailers Are Bottoming -- Add Exposure

Retail stocks are breaking out en masse from technical bottom patterns, marking the reversal of well-established downtrends. This industry-wide...

Vermilion Research

U.S. Equity Weekly: Actionable Ideas in Casinos, Investment Banks

The primary trend in U.S. equity markets remains bullish, and the usual suspects continue to lead: growth (Tech and FANG), homebuilders,...

Vermilion Research