Weekly Calendar 06/20-06/24

Weekly Calendar 06/20-06/24

The Calendar

We have a relatively light week for economic data, but a big one for news. I highlight only the most important items, helping us all focus.

The “A” List

  • The Brexit vote (F). The vote is Thursday, but results will not be available until Friday trading.
  • New home sales (Th). Can recent strength continue?
  • Michigan sentiment (F). Good indicator for employment and spending – remains near highs.
  • Initial claims (Th). The best concurrent indicator for employment trends.

The “B” List

  • Existing home sales (W). Less direct impact than new home sales, but a good read on the housing market.
  • Durable goods (Th). A decline is expected in this volatile series, but how big?
  • Bank stress test results (Th). Mostly important to a few banks, but also a measure of overall financial health.
  • Crude inventories (W). Often has a significant impact on oil markets, a focal point for traders of everything.

Chair Yellen will provide her semi-annual Congressional testimony to the Senate on Tuesday and the House on Wednesday. The question periods will be closely watched. You might think there is nothing left to learn after last week’s FOMC decision and press conference, but any fresh hints will get attention. We also have a resumption of appearances by other Fed participants.

The News

The Good

  • Sea container counts are showing some rebound from the recent soft patch, but we remain well off the highs. (Steven Hansen at GEI).
  • Earnings estimates are strengthening. Check out Brian Gilmartin’s analysis for a detailed look at which sectors and by how much.
  • Fund manager asset allocations to equities remain near an eight-year low. On a contrarian basis, this is bullish for stocks. (Urban Camel).

fund-managers-asset-allocations-percent-cash-june_baml

  • Retail Sales were strong, in both real terms and per capita (New Deal Democrat). More people are shopping online, which makes interpretation of sales more challenging. Doug Short has multiple charts and a “Big Four” update. Ed Yardeni has the online story.

Yardeni online shopping

  • Housing showed strength. The picture remains complicated and a bit mixed.
    • Housing starts met expectations, had revisions for prior months, and an increase of 9.5% over last year. (Calculated Risk)
    • Doug Short analyzes the secular trends in both building permits and housing starts.Housing-Permits-and-Starts-population-adjusted

     

    • NAHB builder confidence increased to 60, up from 58 and well above the expansion signal of 50. (Calculated Risk)

The Bad

  • Industrial production fell 0.4%. This remains the weak spot in the economic data.
  • Foreigners are selling U.S. equities. The pace is an all-time high according to Torsten Sløk, Ph.D., Deutsche Bank Securities via Barry Ritholtz. Check out the chart.
  • The rail contraction continues. Steven Hansen at GEI has his regular update on this story.
  • Jobless claims edged higher. But still reasonable at 277K.
  • Lowered Fed expectations recognize slower growth. Most market participants do not expect lower interest rates to solve this problem. Bloomberg has a good summary of the Yellen conference, including various viewpoints.

The Ugly

Continuing violence and terror. The mass shooting casualties have been getting worse.

massshoot_jun16a-1

Brexit is not another “Y2K” as Barron’s suggested this week, but the uncertainty has had an exaggerated effect. Here are my own conclusions:

  1. The outcome is approximately a coin-flip, making any planning difficult. Either resolution will reduce volatility.
  2. The referendum is advisory, which will be emphasized more next week. Members of Parliament will be informed by voter frustration, but may not accede to the specific plan.
  3. A Brexit would take years of negotiation to accomplish, with many of the agreements most important to the European and world economies re-established.
  4. The actual stakes are smaller than most think. I get some information from confidential sources, and I respect their restrictions. A strong and popular (but unquotable) source did some polling of experts. Likely immediate S&P 500 range is 2 ½% downside and 2% upside. The extremes might be slightly larger. This range fits my own expectations. It is all guesswork, of course, but probably better than the vague notions about dominoes dropping and world trade ceasing.
  5. There may be a surprise outcome from a positive vote. British leaders may use it to negotiate some EU rule changes.

from dashofinsight

 

About Timeless Investor

My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.
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