Warning Signs 02 (Feb 15 - May 19)

[winston]

Citigroup frets that markets are on the cusp of entering a late-cycle peak before entering a recession. They are watching spreads in the coming months and how they respond to the Fed’s tightening, and they are also concerned about corporate leverage.

My Take: We actually agree and have been saying for some time that we see the market and economy as late-cycle, but that in-and-of-itself is not bearish. It just means we should expect slower growth rates and fairly measured upside potential, in our view.

We have written before about watching spreads and corporate leverage, but do not see either as a ‘flashing red’ warning sign just yet.

Source: Zack's Research

[winston]

Bank of America Merrill Lynch’s thinks that investors are not paying attention to earnings, and Societe Generale SA warns that an economy with full employment and slowing momentum (the US) should expect a decline in profit margins.

My Take: Agreed on both counts, but I think it is premature to see this as a warning signal. Our expectation is for improved earnings and margins across the next 2-3 quarters, and perhaps beyond.

If corporations essentially “grow into” their valuations with improved earnings, it does not really make a huge difference in our view that the economy is growing at a muddle-through pace.

Source: Zack's Research

[winston]

The three signals investors should get 'cautious' on the market

by Rebecca Ungarino

First, he believes the forward price-earnings multiple on the S&P 500, which is currently nearly 18 times forward earnings, is historically stretched.

The market cap of the S&P 500 relative to the U.S. nominal gross domestic product is historically high, too. It appears similarly for the Russell 2000, as well as the Wilshire 5000 index, too.

Finally, the S&P 500 market cap relative to the market's broader enterprise value-to-sales ratio is also historically extended.

Source: CNBC.com

https://www.cnbc.com/2017/09/26/the-thr ... yptr=yahoo

[winston]

This Overlooked Number Could Determine Whether Any Market Correction Turns into a Crash

By Shah Gilani

Of all the data in the just-issued Federal Reserve Statistical Release Z.1: Financial Accounts of the United States Q2 report, the fact that households and non-profits have 35.7% of their total financial assets in stocks was most surprising.

That’s the second highest percentage of stock holding for households on record, compared to the high of 42% in 2007, just before markets crashed.

High percentage spikes in 1968, 1972, 2000, and 2007 were followed by market routs.

Deteriorating economic conditions, irrational exuberance, and egregious leveraged speculation kills bull markets.

There are a lot fewer listed companies these days and a lot fewer shares outstanding.

Source: Wall Street Insights

http://wallstreetinsightsandindictments ... /#deeplink

[winston]

3 Danger Signals for Stocks

By Mark Kolakowski

1. First, the forward price-earnings ratio of the S&P 500 for the next 12 months is hovering near its highest level since early 2004
2. Second, the market cap of the S&P 500 relative to U.S. nominal gross domestic product (GDP) is historically high; and
3. Third, the S&P 500 market cap relative to the market's broader enterprise value-to-sales ratio is also historically extended.

Source: Investopedia

http://www.investopedia.com/news/3-dang ... yptr=yahoo

[winston]

Watch this indicator for signs of the next Asian recession

China today boasts over 27 million pet dogs and 53 million pet cats. The pet food market has jumped 40 per cent in the past decade to US$3.5 billion

Source: SCMP

http://www.scmp.com/business/investor-r ... -recession

[behappyalways]

nobel-economist-thaler-says-hes-nervous-about-stock-market
https://www.theedgesingapore.com/nobel- ... ock-market

[winston]

Bond market flashing warning sign even as stocks rally to new highs

Bond pros are watching a phenomenon in the bond market that could signal recession ahead and trouble for the stock market.

The yield curve is flattening, meaning the spread between 2-year note yields and 10-year yields is narrowing, and at 0.75, it was the lowest since before the financial crisis.

Even though the move is a warning, strategists say some of the action has to do with the Fed reversing long-term easing policy and may not be a problem for stocks.

Source: CNBC

https://www.cnbc.com/2017/10/18/bond-ma ... KW,12UK5,1

[winston]

The market usually gives this 'advance warning' before plunging

The S&P 500 posted an average of 67 trading days of high volatility, in which it rises or falls by 1 percent or more, before it tops out and drops at least 10 percent.

But the market is giving no signs of such turbulence, equity strategist Sam Stovall says.
Over the past 12 months, the S&P 500 has had just 11 days in which it rose or fell at least 1 percent.

by Fred Imbert

Source: CNBC.com

https://www.cnbc.com/2017/10/24/the-mar ... yptr=yahoo

[winston]

Why worry: 7 troubling signs for the stock market

By Jeff Reeves

S&P 500 is at record levels, but don’t overlook these risks

1. Growth may be peaking.
2. Earnings aren’t all grand.
3. Things are too quiet.
4. The charts hint at trouble.
5. Investors are wide-eyed optimists.
6. Where’s the pro-business agenda?
7. “Have nots” are not fine.

Source: Markety Watch

http://www.marketwatch.com/story/why-wo ... yptr=yahoo