Monthly Archives: March 2015

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of March 13, 2015:

from page 21:

(click on charts to enlarge images)

2015 and 2016 earnings forecasts

from page 22:

S&P500 earnings 2005-2016

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2090.58 as this post is written

S&P500 Earnings – Estimates For Years 2014 Through 2016

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings tag)

The following estimates are from Exhibit 12 of “The Director’s Report” (pdf) of March 18, 2015, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2013 value is $109.68/share:

Year 2014 estimate:

$118.77/share

Year 2015 estimate:

$120.32/share

Year 2016 estimate:

$136.17/share

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2093.27 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2015 & 2016 – As Of March 12, 2015

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings tag)

For reference purposes, the most current estimates are reflected below, and are as of March 12, 2015:

Year 2015 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $118.70/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $111.33

Year 2016 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $135.72/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $123.70/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.01 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the March 12, 2015 update (reflecting data through March 6) is -1.062.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on March 18, 2015 incorporating data from January 5,1973 to March 13, 2015, on a weekly basis.  The March 13, 2015 value is -.75:

(click on chart to enlarge image)

NFCI 3-18-15 -.75

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 18, 2015:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on March 18, 2015 incorporating data from January 5,1973 to March 13, 2015, on a weekly basis.  The March 13 value is .22:

ANFCI 3-18-15

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 18, 2015:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2067.23 as this post is written

Euro Vs. The U.S. Dollar – March 17, 2015 Update

One of my ongoing concerns is the level and future resiliency of the U.S. Dollar.

For reference, below is a chart that I find notable.  It provides a comparison of the Euro (on the top plot) to the Dollar  (found on the bottom plot) on a daily basis over the last five years:

(chart courtesy of StockCharts.com; chart creation by the author)

(click on charts to enlarge images)

Euro vs. U.S. Dollar

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2071.91 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – March 13, 2015 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Doug Short’s blog post of March 13, 2015 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the March 13 release, indicating data through March 6, 2015.

Here is the ECRI WLI (defined at ECRI’s glossary):

ECRI WLI

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

Dshort 3-13-15 - ECRI-WLI-YoY

This last chart depicts, on a long-term basis, the WLI, Gr.:

ECRI WLI,Gr.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2045.19 as this post is written

The March 2015 Wall Street Journal Economic Forecast Survey

The March Wall Street Journal Economic Forecast Survey was published on March 12, 2015.  The headline is “WSJ Survey:  Economists See Dollar Strength, Global Weakness Restraining U.S. Growth.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

Two excerpts:

They expect much of the lost activity will be made up in the spring, allowing the economy to grow at a 3% pace in the second quarter. For the entire year, the economists think GDP will grow 2.9%. That would beat the 2.4% increase in 2014 and be fast enough to push the unemployment rate down to 5.1% by December from 5.5% in February, they said.

also:

But stronger domestic demand is contributing to a wider U.S. trade deficit, already evident in the fourth quarter. Faster consumer and business spending in the U.S. caused imports to jump during the quarter, while exports grew only modestly. The wider trade gap subtracted a huge 1.15 percentage points from GDP growth in the fourth quarter.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 10.76%; February’s average response was 11.11%.

The current average forecasts among economists polled include the following:

GDP:

full-year 2015:  2.9%

full-year 2016:  2.8%

full-year 2017:  2.6%

Unemployment Rate:

December 2015: 5.1%

December 2016: 4.8%

December 2017: 4.8%

10-Year Treasury Yield:

December 2015: 2.72%

December 2016: 3.44%

December 2017: 3.89%

CPI:

December 2015:  1.3%

December 2016:  2.2%

December 2017:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2015: $59.80

for 12/31/2016: $66.88

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2045.34 as this post is written

Total Household Net Worth As Of 4Q 2014 – Two Long-Term Charts

In the last post (“Total Household Net Worth As A Percent Of GDP 4Q 2014“) I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1949:Q4 to 2014:Q4).  The last value (as of March 12, 2015) is $82.91220 Trillion:

(click on each chart to enlarge image)

total household net worth

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:

total household net worth percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed March 12, 2015:

http://research.stlouisfed.org/fred2/series/TNWBSHNO

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.95 as this post is written

Total Household Net Worth As A Percent Of GDP 4Q 2014

The following chart is from the CalculatedRisk blog post of March 12, 2015 titled “Fed’s Q4 Flow of Funds:  Household Net Worth at Record High.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

household net worth percent of GDP

As seen in the above-referenced CalculatedRisk blog post:

Prior to the recession, net worth peaked at $67.9 trillion in Q2 2007, and then net worth fell to $54.9 trillion in Q1 2009 (a loss of $13.0 trillion). Household net worth was at $82.9 trillion in Q4 2014 (up $28.0 trillion from the trough in Q1 2009).

The Fed estimated that the value of household real estate increased to $20.6 trillion in Q4 2014. The value of household real estate is still $1.9 trillion below the peak in early 2006.

As I have written in previous posts on this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.95 as this post is written

March 2015 Duke/CFO Magazine Global Business Outlook Survey – Notable Excerpts

On March 11, 2015 the March Duke/CFO Magazine Global Business Outlook Survey (pdf) was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.

In this CFO Survey, I found the following to be the most notable excerpts:

About 70 percent of U.S. companies indicate that wages are starting to outpace inflation. Wage growth should be at least 3 percent in tech, services and consulting, manufacturing and health care.

also:

U.S. CFOs are very optimistic about 2015. On a scale from 0 to 100, they rate the outlook at 65, the most optimistic expectations for the U.S. economy since 2007. Even with this optimism, U.S. executives express pressing concerns related to governmental policies and regulations, the cost of benefits, economic uncertainty, difficulty in hiring and retaining the right employees, and data security.

also:

Twenty-seven percent of U.S. companies expect to make an acquisition during the next 12 months. Merger activity will be especially robust in communications/media and technology, where more than half of companies expect to acquire the assets of another firm.

The CFO survey contains two Optimism Index chart, with the bottom chart showing U.S. Optimism (with regard to the economy) at 65, as seen below:

Duke CFO Magazine CFO Confidence

It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.

(past posts on CEO and CFO Surveys can be found under the “CFO and CEO Confidence” tag)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2040.20 as this post is written