APRIL 2016 : MARKET ANALYTICS & TECHNICAL ANALYSIS - (Subscription Plan IV)
The story this month is earnings. Q1 2016 earnings are expected to see the biggest quarterly drop since 2009. S&P Forward Earnings expectations have been steadily falling since mid 2014 and have again dverged from stock prices. Corporate cash flows and EBITDA have correspondingly been falling which is hurting investment flows. To quote David Stockman (former Regan Administration Budget chief): "The signs of an impending macroeconomic and profits implosion are now so overwhelming that it is truly remarkable that there are any bids left in the casino at all!"
It is believed that the recent US Economic forecast by the Richmond Fed prompted an emergency March 11th FOMC meeting and a visit by Chairperson Janet Yellen to the White House immediately following the meeting. What we have been screaming from the roof tops appears to have finally reached the hallowed halls of the Federal Reserve.
The total US Monetary Base has began shrinking and the correlation with weakness in the S&P 500 index is evident. A falling Monetary Base is hurting liquidity which is hurting financial flows. Global trade has been slowing at rates corresponding to 2007 and now the 2016 US consensus GDP growth is being reduced. Like earning expectations it is dramatically diverging from a still buoyant US stock market.
We believe a lack of CAPEX spending and business investment is now showing in falling top line revenue and sales growth. Normally it can be expected that a slowing business investment cycle will lead the overall economy into recession when business investment contracts.
Look out for "Recession" and "Stagflation" to domnate the wordclouds in coming quarters!
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