As promised, it’s always good to step back occasionally and make darn sure we are not all being Lemurs (most known for following each other without thought) and gathering together, just before we go over the cliff….
Ok, so you are about to receive a blast of charts… we will code this post Forecast so we can go back and look at the “Forecasts” later….
Is the Market (S&P 500) Expensive?
This is the trailing PE (Price Earnings Ratio) the most macro valuation measure used from our Friends at Factset !
Green dotted line represents, 5 year average, and the dark dotted line represents the 10 year average….
Answer – Not cheap, but MAYBE not as frothy as it may feel at times (present party included) – certainly have been MUCH more expensive in the past…
Remember, tariff progress may release some pent up/held on the sidelines demand!
What Areas are PROJECTED to Grow in 2020
This is what analysts are PROJECTING/Forecasting (hence our coding for future review) for the year 2020!
Recent Losers are expected to be next years winners- i.e. Energy and Materials….
What happens if Tariff Agreements are not reached? Not being negative here but we must consider this could be better or worse!
Earnings Versus Market Price Movement
You hear us say all the time, Earnings are the ultimate driver of prices… and they are….
No one says this is easy…. Earnings have been flat, but markets up….
Theoretically this should not happen … UNLESS market participants expect future earnings growth as markets are forward looking.
How about the Consumer?
Recall the consumer drives over two thirds of the economy through spending in our consumer consumption economy….
A Happy Consumer = Spending Consumer
One of the many Consumer Sentiment Indicators… University of Michigan…
Steady as she goes!
Ok … you get the point, not too bad!
We could find something really hot and really cold, but these are the biggies from a high level!
Of course we did not forget the inverted yield curve and it’s recession predictiveness … we spoke about it here, here, here and here…. more to come…
Have a Great “Lemur Checkup” Day!
John A. Kvale CFA, CFP
!
Drink from a Fire Hydrant of CEO’s and Company Executives – Friday
We were happy to receive our invitation to a local gathering co-sponsored by the CFA Organization (Chartered Financial Analyst) – an organization that I was president of a few years ago and maintain contacts and membership.
Wednesday and Thursday of this week, in rapid fire form, over 100 CEO’s and C level executives from all over the country, presented their company to groups of folks for a better understanding and possible investment.
We cherish this event every year, as it gives us a great candid feel for what’s going on in the economy and we get to meet a wide variety managers in different industries…..
So here’s a quick review:
The energy companies that we sat in on where mellow, but longer-term positive, and much discussion about lower debt, and future higher prices, with lots of hedging as topics. Overall the energy executives felt good long-term but we’re less certain in the very shorter term. Cautiously positive, but managing very well.
Listening to a insurance company that deals with high risk properties – high risk because they’re on one of the eastern shores that is the recipient of bad weather, tactics for maximizing revenues, without passing higher expenses on to their customers, due to inelastic customers, were the topic as well as fingers crossed for no major bad weather.
The first days keynote speaker for lunch was fantastic:
“How Government Policy Drives Stock Market Returns” was the title of his presentation.
His conclusion, Politics affect Capital Markets but it’s not sustaining, what truly affects Capital Markets longer term is policy. We could not agree more … when new rules are instituted, that’s when talk becomes action and you have a definitive line in the sand.
Maybe something we should all remember as we enter a Presidential Election in the coming year!
On Thursday a delightful visit with the CEO of a local steel company, her thoughts on policies, tariffs which surprisingly were somewhat muted. Tariffs did not seem to bother her, but a recession would not be welcomed. Cyclical concerns in a very cyclical industry and defense of such cycles were very well presented.
The lunch speaker of the second day was also very interesting and had two main points:
Jerome Powell and China
This chart was interesting and may make future discussions, the gist is that when rates have been lowered while an inverted yield curve occurs, it deters the recession… the recession occurs when raising DURING the inversion ….. Hmmmmm ….first time we have heard this, but it peaked our interest….
Regarding China… In a nutshell he felt like China would agree to a multiple part Tariff contract and this was someway a necessity due to China’s current economic situation, and also most politicians stance against China and their tariffs, offering no option for relief.
In conclusion, from a very high-level, everyone was well aware that this economy is not growing extremely fast, but it’s still growing. Many shared our thoughts that we may have a soft recession but a very hard recession is likely not in the cards. Very few touch the political landscape and for the most part we’re generally positive.
Ahhhh…. a HEAVY Friday for you huh ?
Apologies, but we have a short week next week and wanted to get this to you as we know you were hanging on the edge of your chair waiting…. HAHA … kidding of course, recall this is a working Diary for us as well….
Have a Great “Executive Updated” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Economy, FOMC, Forecast, Interest Rates, Market Comments
Tagged CFA, Jerome Powell, Southwest Ideas Conference, Southwest Showcase