Monthly Archives: April 2015

S&P500 Earnings – Estimates For Years 2014 Through 2017

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 April 21, 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:

$118.78/share

Year 2015 estimate:

$119.30/share

Year 2016 estimate:

$134.62/share

Year 2017 estimate:

$149.02/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 2097.29 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2015 & 2016 – As Of April 17, 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 April 17, 2015:

Year 2015 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $118.02/share

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

-From a “bottom up” perspective, “as reported” earnings of $110.95

Year 2016 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $134.27/share

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

-From a “bottom up” perspective, “as reported” earnings of $125.36/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 2100.67 as this post is written

CEO Confidence Surveys 1Q 2015 – Notable Excerpts

On April 8, 2015, The Conference Board and PwC released the 1st Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 57, down from 60 in the fourth quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this April 8 Press Release include:

CEOs’ appraisal of current economic conditions was more positive than last quarter. Approximately 55 percent claim conditions were better compared to six months ago, up from 52 percent in the fourth quarter of 2014. However, business leaders’ assessment of conditions in their own industries declined. Now, just 35 percent say conditions in their own industries have improved, compared with 43 percent last quarter.

CEOs were more pessimistic regarding the short-term outlook. About 38 percent of business leaders anticipate economic conditions will improve over the next six months, down from 49 percent last quarter. Expectations for their own industries, however, were down moderately, with 34 percent of CEOs anticipating an improvement, compared to 36 percent in the fourth quarter of last year.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 1st Quarter of 2015.   Notable excerpts from the March 3 release, titled “Modest Uptick in Business Optimism, Especially for Investment, but Still Below Economy’s Full Potential”:

The Business Roundtable released its first quarter 2015 CEO Economic Outlook Index, which provides a picture of the future direction of the U.S. economy based upon CEOs’ plans for sales, capital spending and hiring. The overall Index is up from the fourth quarter of 2014, but has been in the same general range for the past year and a half.  The six-month outlook for sales hit a three-year high this quarter.

CEOs said they expect 2015 gross domestic product (GDP) growth of 2.8 percent, slightly below consensus estimates, but a 0.4 percentage point increase over their projection from the fourth quarter of 2014.

also:

The Business Roundtable CEO Economic Outlook Index – a composite index of CEO plans for the next six months of sales, capital spending and employment – rebounded in the first quarter of 2015 to 90.8 from 85.1 in the fourth quarter of 2014. The long-term average of the Index is 80.5.

_____

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 2102.31 as this post is written

Updates Of Economic Indicators April 2015

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The April 2015 Chicago Fed National Activity Index (CFNAI) updated as of April 20, 2015:

cfnai-monthly-ma3

The ECRI WLI (Weekly Leading Index):

As of April 17, 2015 (incorporating data through April 10, 2015) the WLI was at 132.5 and the WLI, Gr. was at -1.4%.

A chart of the WLI,Gr., from Doug Short’s post of April 17, 2015, titled “ECRI Recession Watch:  Update“:

ECRI WLI,Gr. since 2000

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting the ADS Index from December 31, 2007 through April 11, 2015:

ADS Index

The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the April 17, 2015 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased Again,” the LEI was at 121.4 and the CEI was at 112.0 in March.

An excerpt from the April 17 release:

“Although the leading economic index still points to a moderate expansion in economic activity, its slowing growth rate over recent months suggests weaker growth may be ahead,” said Ataman Ozyildirim, Economist at The Conference Board. “Building permits was the weakest component this month, but average working hours and manufacturing new orders have also slowed the LEI’s growth over the last six months.”

Here is a chart of the LEI from Doug Short’s blog post of April 17 titled “Conference Board Leading Economic Index Remains in Growth Territory“:

Conference Board LEI

 

_________

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 2103.03 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – April 17, 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 April 17, 2015 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the April 17 release, indicating data through April 10, 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 4-17-15 -  ECRI-WLI-YoY -1.3 percent

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 2076.13 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 April 9, 2015 update (reflecting data through April 3) is -1.072.

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 April 15, 2015 incorporating data from January 5,1973 to April 10, 2015, on a weekly basis.  The April 10, 2015 value is -.79:

(click on chart to enlarge image)

NFCI 4-15-15

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 15, 2015:

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

The ANFCI chart below was last updated on April 15, 2015 incorporating data from January 5,1973 to April 10, 2015, on a weekly basis.  The April 10 value is .49:

ANFCI 4-15-15

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 15, 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 2106.63 as this post is written

NFIB Small Business Optimism – March 2015

The March NFIB Small Business Optimism report was released yesterday, April 14, 2015. The headline of the Small Business Economic Trends report is “In Rare Occurrence, All Ten Components Of NFIB Small Business Optimism Index Weakened.”

The Index of Small Business Optimism decreased 2.8 points in March to 95.2.

Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):

INVENTORIES AND SALES

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months improved 3 points, to a net negative 3 percent. Certainly consumer spending has not shown much energy in the past few months. Eleven percent cited weak sales as their top business problem, down 1 point. Expected real sales volumes posted a 2 point decline, falling to a net 13 percent of owners expecting gains, after a 5 point decline in January and February. Sales prospects are still looking reasonably good to owners, just not as hot as in the fourth quarter last year.

After 4 months of positive inventory investment, the pace of inventory investment reversed direction, with a net negative 4 percent of all owners reporting growth in inventories (seasonally adjusted). The net percent of owners viewing current inventory stocks as “too low” deteriorated 3 points to a net negative 5 percent, indicating that inventories are excessive when compared to expected sales volumes. The net percent of owners planning to add to inventory stocks fell 3 points to 1 percent, positive, but not a large force behind inventory investment in Q2.

also:

CAPITAL SPENDING

Fifty-eight percent reported outlays, down 2 points.  Spending has not caught fire in spite of historically low interest rates. There is too much uncertainty and expected growth is too soft. Of those making expenditures, 40 percent reported spending on new equipment (down 3 points), 24 percent acquired vehicles (down 1 point), and 14 percent improved or expanded facilities (down 2 points). Eight percent acquired new buildings or land for expansion (unchanged) and 10 percent spent money for new fixtures and furniture (down 2 points). The percent of owners planning capital outlays in the next 3 to 6 months fell 2 points to 24 percent, not a strong reading historically. Of the 42 percent of owners who said it was a bad time to expand (down 1 point), 21 percent (down 2 points) still blamed the political environment.

also:

CREDIT MARKETS

Five percent of owners reported that all their credit needs were not met, up 2 points but historically low. Thirty-five percent reported all credit needs met, and 48 percent explicitly said they did not want a loan. For most of the recession, record numbers of firms have been on the “credit sidelines”, seeing no good reason to borrow. Only 3 percent reported that financing was their top business problem. Thirty-two percent of all owners reported borrowing on a regular basis, up 2 points. The average rate paid on short maturity loans rose 60 basis points to 5.7 percent. Loan demand remained historically weak. The net percent of owners expecting credit conditions to ease in the coming months was a negative 6 percent, a 2 point deterioration. Interest rates are low, but prospects for putting borrowed money profitably to work have not improved enough to induce owners to step up their borrowing and spending.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the April 14 Doug Short post titled “Small Business Optimism:  A Nine-Month Low“ :

NFIB Small Business Optimism Index

Further details regarding small business conditions can be seen in the full March 2015 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2095.84 as this post is written

Disturbing Charts (Update 18)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 70 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last updated 3-17-15):

Housing Starts

US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started[HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, April 14, 2015.

The Federal Deficit (last updated 2-20-15):

Federal Deficit

US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, April 14, 2015.

Federal Net Outlays (last updated 2-20-15):

Federal Net Outlays

US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, April 14, 2015.

State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 3-27-15):

ASLPITAX percent change from year ago

US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, April 14, 2015.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 4-1-15):

Total Loans and Leases percent change from year ago

Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, April 14, 2015.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 4-1-15):

Total Bank Credit percent change from year ago

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks[TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, April 14, 2015.

M1 Money Multiplier (last updated 4-9-15):

money multiplier

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, April 14, 2015.

Median Duration of Unemployment (last updated 4-3-15):

Median Duration of Unemployment

US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, April 14, 2015.

Labor Force Participation Rate (last updated 4-3-15):

labor force participation rate

US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, April 14, 2015.

The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated 3-23-15):

Chicago Fed National Activity Index MA-3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average[CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, April 14, 2015.

I will continue to update these charts on an intermittent basis as they deserve close monitoring…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2095.84 as this post is written

April 2015 IMF Report – Probabilities Of Recession And Deflation

The International Monetary Fund (IMF) recently published the April 2015 “World Economic Outlook.” (pdf)  The subtitle is “Uneven Growth:  Short- and Long-Term Factors.”

One area of the report is Figure 1.13 on page 20.  While I do not agree with the current readings of the two measures presented – Probability of Recession and the Probability of Deflation – I do find them to be notable, especially as one can compare these estimates across various global economies.

As one can see, the U.S. is estimated to have a roughly 12.5% probability of recession and roughly a less than 1% probability of deflation for the periods indicated.

_________

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 2094.43 this post is written

The April 2015 Wall Street Journal Economic Forecast Survey

The April Wall Street Journal Economic Forecast Survey was published on April 9, 2015.  The headline is “WSJ Survey:  Economists Think Fed Will Wait Until September to Raise Rates.”

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.

An excerpt:

“If you look at the broad set of data that we’ve gotten in recent months, data has very much surprised to the downside,” New York Fed President William Dudley said Wednesday. “It’d be reasonable to think that the timing of the Fed’s first rate hike might be a little further off in time. I can imagine a situation where a June rate hike could still be in play…but obviously it’s a bigger hurdle because we’ve had a lot of weak data. Now you have to see sufficient data on the other side. Now the bar is a little higher.”

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 11.23%; March’s average response was 10.76%.

The current average forecasts among economists polled include the following:

GDP:

full-year 2015:  2.7%

full-year 2016:  2.7%

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: 2.56%

December 2016: 3.29%

December 2017: 3.75%

CPI:

December 2015:  1.3%

December 2016:  2.3%

December 2017:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2015: $58.03

for 12/31/2016: $65.94

(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 2103.61 as this post is written