Inflation continues to decelerate rapidly
24 April 2023 Following the latest CPI and PPI data, it seems even more clear that inflation mostly peaked around June/July last year and has been easing since, particularly in the last six months. This note follows up on the comments I made back in December, highlighting the influence of shelter costs and the Fed’s […]
New Earnings Season Screens report offers guidance during reporting season
15 April 2023 We recently launched a new report designed to guide our institutional clients during earnings seasons. It is based around an “Earnings Screen Score” ranking methodology that draws on selected inputs from our long-standing MAER stock database to identify companies which have strong near-term fundamental momentum going into an earnings report. Our research […]
The MAER stock ranking model: 10 years of out of sample history
28 February 2023 A bit of history Mill Street Research was founded around this time seven years ago, and the MAER stock selection model has been the anchor for Mill Street’s “bottom up” quantitative stock selection analysis since then. The MAER name is an acronym for the product’s original name, the Monitor of Analysts Earnings […]
Do Analyst Estimate Revisions (Still) Help Forecast Relative Stock Returns?
15 January 2023 Some of the common questions among fund managers who are looking at Mill Street’s stock selection and asset allocation tools are on the topic of whether using analyst estimate revisions metrics for stock return forecasting is useful: “Do analyst estimates really matter for stocks nowadays? “ “Aren’t equity analysts always conflicted, and […]
Divergent shelter costs are muddying the inflation debate
A key topic within the broader inflation debate is the influence of the biggest single component of the CPI: shelter. At about 33% of the current CPI weight, shelter (housing/rent) costs are clearly important, but measuring them is harder than it might seem.
Inflation in goods is already over
The focus of the inflation headlines, and most of the comments from Fed officials, has been on the year-on-year reported inflation rate of the CPI (or PCE). However, the extremely volatile macro environment has produced far more volatility in reported inflation data than has been seen for most of the last 30 years.
Can UK stocks keeping outperforming?
UK stocks have been outperforming the global market recently, and our indicators remain supportive, particularly if value and commodity stocks remain in favor.
After lagging for much of the last decade, UK stocks have been strongly outperforming the global market this year in local currency terms, and even in US dollar terms more recently. We have been overweight the UK in our regional allocation guidance since March and remain so based on our bottom-up indicators.
Analysts have become quite bearish on US earnings forecasts
A question we have heard several times from clients has been: when will equity analysts get as bearish as investors have been recently? Well, analysts may be getting closer to that point now, particularly for the large-cap US stocks that dominate the cap-weighted indices.
Watching the Fed watching the data
The markets have remained focused on the Fed (and occasionally the Bank of England), and the Fed has kept its focus on the trailing reported inflation data (CPI, PCE, etc.) and on the labor market data (job growth, wages, etc.). The Fed’s view is that inflation cannot sustainably come down to a suitable level (2-3%) unless income growth slows down significantly. That is, income growth must decline to reduce excess demand. This certainly makes sense up to a point, but of course prices are determined by the combination of demand and supply.
All eyes still on the Fed
Short-term movements in stocks, bonds, and currencies continue to be driven primarily by changes in investor perceptions about the Fed’s likely course of action over the next 6-12 months. In response to client questions, the following are some comments and charts reviewing recent history and the current backdrop.