US resumes regional earnings leadership, along with Japan, Taiwan, and Korea
Before the Q1 earnings reporting season, the US had been gradually slipping on relative earnings estimate revisions metrics, but the Q1 results came in much stronger than expected almost across the board. With the Tech/AI leadership in the US resurgent, the US has jumped back near the top of our regional revisions rankings, supporting our […]
US stocks don’t really care much about oil prices
The turmoil in the Middle East and the rise in energy commodity prices continues, but stock prices have mostly decided they don’t care that much. Energy prices are not a major driver of US corporate earnings, and the inflation seems not to worry the Fed enough to change policy. Headlines are all about Iran and […]
Market outlook update — reducing equity exposure
It has been an eventful year so far, and the backdrop has changed a lot since the end of February. Below is an overview of some of Mill Street’s recent comments on the market outlook, capturing both our proprietary model output and qualitative macro views. Risk appetite and trend weakening rapidly amid geopolitical risk, model […]
Rotation in stocks is intense but likely overdone
A lot of last year’s losers are this year’s winners, and vice versa, as investors stay in equities but have rotated aggressively. Much of this is not driven by earnings outlooks (at least for the next year or so), but valuation concerns and short-term sentiment and positioning. While some shifts may be reasonable, some of […]
Why US stocks have underperformed this year
The US has had stronger earnings growth than much of the rest of the world, but it has been unable to outperform this year due to the narrowing of its valuation premium. This likely reflects a combination of stronger ex-US earnings growth, high US policy risk, and the rapidly growing relative concentration risk in the […]
Divergence in the Tech space: Technology vs Communication Services
The Tech-related space remains the focus in the US, and we have recently noted a growing divergence between the Technology sector and its cousin Communication Services in the S&P 500: Tech remains strong while Communication Services is weakening. We thus see growing selectivity by analysts and investors in the Tech/AI space and our sector allocations […]
The Fed’s dilemma (or trilemma?)
The Fed has made clear that it is struggling to balance the two parts of its dual mandate: inflation and employment, and now faces a third concern of political pressure. It is leaning toward employment risks over inflation risks right now, but will be constrained from aggressive moves while this tension persists, along with trying […]
Trade war effects on earnings estimates
Every week seems to bring a new twist in the bizarre and unnecessary trade war started by the Trump administration, which is hurting many companies and consumers but is thus far having little impact on the major US equity market indices, though it is pushing the US dollar down. The latest headlines indicate higher tariffs […]
Policy and market damage means volatility likely to stay for a while
Despite a recent respite, our indicators tell us that market volatility is likely to stay elevated for a while longer, with important implications for asset allocation and stock selection. Significant damage is being done to the US economy and the global trading system. After several years of relatively calm equity markets despite volatility in bond […]
US giving up leadership in markets and fundamentals
The big theme in markets and in Mill Street’s work with clients recently has been the dramatic shift in leadership away from the US and toward the rest of the world, especially Europe. Risk appetite has weakened as US economic policy uncertainty has skyrocketed and the growth outlook has deteriorated, making equities riskier in our […]