Yaonology -Read Charts, Learn Economics

  1. Personal Consumption, Personal Income, Inflation CPI, Rate Cut
    Following the vast consumption stagnation caused by the government’s closure in December last year, consumption this year usually has been growing. Especially in July, the actual expenditure was 0.1% higher than the predicted.

The personal consumption is irrelative with recessions, based on the data since the 1960s. However, a more accurate trend during recessions is a sharp decline in domestic investment.

However, personal income is low, and PCE core inflation is below 2%.

Based on the market prediction, the data indicates that the probability of the FED rate cut is nearly 100% in September.

#usconsumption #personalconsumption #monthconsumption #economic 

Source: The Daily Shot, FRED, FED Reserve Bank of Atlanta, RBC Wealth management

2. The worst record in August for emerging-market currencies, especially in BRIC(Brazil, Russia, India, and China)

Brazil Real drops from $3.75 to $4.1

Russia Ruble drops from $63.5 to $66

India Rupee drops from $69 to $71.9

China Yuan drops from $6.88 to $$7.15

Source: Bloomberg, Emerging Markets Are Often Bad in August, But Rarely This Bad

3. The US boosts Tariffs on $300Billion China’s goods are now in place, and there is more on the way in December. The second chart shows the increasing goods price is affected by tariff thus far.

4. Some Economic Indicator
The Longview Economics safe-haven positioning model indicates that the investors are in the positioned for risk-off
Risk-on: The market is in a positive investment environment. The investors are willing to buy stocks and high-yield instruments.
Risk-off: The market is in an uncertainty investment environment. The investors are willing to sell their shares.

The BofA Merrill Lynch Bull & Bear Indicator shows that the stock market is in the extreme bear.

However, SP500 is in fair value. The analyst estimate that the stock market will be a recession in mid-2020 and SP500 will breakdown to negative standard deviation.

Source: Longview Economics, Bank of America Merrill Lynch Global Research, Stifel Equity Strategy

5. The US August ISM Manufacturing PMI drops below 50, the first time since 2016. It looks like the US 10-year bond yield is the leading indicator for PMI. Will the PMI continues to drop again in September? Focus on the 10-year bond yield.

Source: Daily shot, Piper Jaffray

6. The average large-cap profit margin is still growing (a little bit down-trend this year), but the average small-cap profit margin drops a lot — the profit margin gap between large-caps and small-caps record the historical high.

The chart shows that US small-caps earnings growth is negative, and estimates have deteriorated sharply.

The US small-cap (S&P 600) debt-to-equity ratio is now higher than the equivalent measure for large caps. Will recession starting from the small-cap company?

Source: LizAnnSonders, DataArbor, BCA Research

7. September, October, November are the most turbulent months for stocks. 

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Source: Dow Jones Market Data

8.  The US Companies have shifted their spending from expenditures to share buybacks and dividends.

However, it looks like that share buyback activity remains robust but is running behind last year’s levels.

Source: JP Morgan, Deutsche Bank Research

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