Monday, November 26, 2018

GM Restructuring News Not A Sign Of A Slowing Economy

Today General Motors (GM) announced a restructuring that will cut 14,000 positions and the possibility of closing five auto manufacturing plants. Some headlines attributed the restructuring to an economy that may be slowing. However, when one reviews the data that comprise new sales of automobiles and light trucks, the exact opposite conclusion is drawn. A divergence has developed in the sale of cars versus light trucks that is clearly evident when one looks at unit sales volume in the below chart. Since 2014 a noticeable turn in interest has occurred toward the light truck category and away from the automobile category. In other words, it appears GM is responding to market forces and focusing the future of the company on the light truck market.

Thursday, November 22, 2018

Low Level Of Bullishness Means Equity Market Bottom Maybe Near

Investor sentiment continues a trend of turning less bullish. Today's Sentiment Survey report from the American Association of Individual Investors noted individual investor bullish sentiment decline 9.8 percentage points to 25.3%. Neutral sentiment declined 1.3 percentage points with the result that bearish sentiment rose 11.2 percentage points. The net result is the bull/bear spread of -21.8 pp is the widest since the spread reached -29 pp in February 2016.

Thursday, November 15, 2018

Institutional And Individual Investors More Bearish On Equities

At the end of October the American Association of Individual Investors reported individual investor bullish sentiment was 28.0%, one standard deviation below the bullishness average. Sentiment measures are contrarian ones and are most actionable at their extremes. October's reading was certainly not an extreme level; however, the reading was at a low level of bullishness for the individual investor sentiment measure. Since the January market high, the bullishness reading has vacillated between +26% to +45%, with a level in the mid teens being an extreme.  Today's reading of 35.1% bullishness falls within this range, as does the 36.2% 8-period moving average.

Wednesday, November 14, 2018

Small Business Continues To Be Highly Optimistic

Today's NFIB Small Business Optimism Index was reported at a strong 107.4, down only 1.4 points from the Index's 45-year August high. According to the NFIB report for October,
"Small business optimism continued its two-year streak of record highs. Overall, small businesses continue to support the 3%+ growth of the economy and add significant numbers of new workers to the employment pool. Owners believe the current period is a good time to expand substantially, are planning to invest in more inventory, and are reporting high sales figures. Seasonally adjusted, 30 percent of owners think the current period is a good time to expand substantially, citing the economy (72%) and strong sales (14%)."

Sunday, November 11, 2018

Dollar Defies The 7-Year Cycle

Historically the U.S. Dollar has had a tendency to exhibit strength over a 7-year cycle. In July of this year the Dollar strength cycle crossed into its eighth year though, as seen in the below chart.