Be in the know. 15 key reads for Saturday…

  1. Jaguar And Audi Beating Tesla Model S And X Sales In Europe (ValueWalk)
  2. Week in review: How Trump’s policies moved stocks: (TheFly)
  3. Papa John’s announces Shaquille O’Neal as new ambassador (New York Post)
  4. Stephen Moore, Trump’s pick for Fed, will be lightning rod for president’s opponents (MarketWatch)
  5. Warren Buffett Hates It. AOC Is for It. A Beginner’s Guide to Modern Monetary Theory (Bloomberg)
  6. Robert Mueller’s report is finally finished. This is what we know about his probe so far (CNBC)
  7. A $1.6 trillion credit market could batter the global economy. And you will take the hit if it implodes, not Wall Street (Business Insider)
  8. Opinion: Pinterest’s IPO filing: 5 things investors should know (MarketWatch)
  9. Economic Models Predict a 2020 Wipeout (Vanity Fair)
  10. China Is Building up to 20 Floating Nuclear Power Plants (Futurism)
  11. Olive Garden owner posts solid jump in sales (CNN)
  12. Homebuyers to get springtime boost from lower-than-expected mortgage rates (USA Today)
  13. Trump Administration Strikes Tougher Stance Ahead of China Talks (New York Times)
  14. Lyft, Uber, and Slack are the IPOs getting all the attention — but a different corner of the market is heating up (Business Insider)
  15. Investing Lessons From the Activist Playbook (Barron’s)

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Earnings Update: Why Q1 is “Make or Break” (-3.7% expectations for Q1)

Source: FactSet

Not much has changed in the last couple of weeks on the earnings front (expectations have dropped from -3.4% to -3.7%).  The good news is that Q1 2019 earnings expectations are very low and will likely be beaten.  The risk (in my view) as laid out in this article I wrote 2 weeks ago is if Q1 2019 S&P 500 operating earnings come in below $34.98 (Q4 2018 Operating Earnings).

Yield Curve vs. Earnings: Bull vs. Bear DEATH MATCH!

If we get a second quarter of sequential operating earnings drop, it would potentially signal an underlying deterioration in the economy last seen only in 2007 and 2000 (and preceded major lower lows in the stock market). I do not think we will get a 2nd sequential drop in Operating Earnings (Q4 2018 to Q1 2019) but it will come in close.

If we avoid the second sequential drop in operating earnings (which would require a > 4.26% drop in operating earnings yoy), that would imply the lows of December should hold for some time and if past is any prologue the peak of the market should be 1.5-2yrs after the 2yr Treasury and 10yr Treasury inverts (getting close).

Factset: “The percentage of companies issuing negative EPS guidance is 73% (77 out of 105). This percentage is above the 5-year average of 70%, as more companies have issued negative EPS guidance than average and fewer companies have issued positive EPS guidance than average.  At the sector level, the Information Technology and Health Care sectors are the main contributors to the above average negative sentiment in EPS guidance for the first quarter.”

Earnings guidance for 2019 remains aggressively back-end loaded (factset):

As I said in the above-posted article Q1 earnings will be “make or break” for the market.  Expectations are extremely low which creates the possibility for positive surprise but we don’t count our chickens before they hatch.

 

 

 

 

Be in the know. 5 key reads for Friday…

  1. Say Goodbye to the Stock Market’s Secret Sauce (Wall Street Journal)
  2. German 10-Year Yields Drop Below Zero for First Time Since 2016 (Bloomberg)
  3. Stock-market analyst who called 2018 rout says if earnings are weak, ‘I don’t think stocks are going to look through it’ (MarketWatch)
  4. A star investor in ‘The Big Short’ is betting against Canadian banks (Business Insider)
  5. Services Data Point to Sharper Slowdown (Wall Street Journal)

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