The Year of the Dog

Tue, 2018/02/06 - 3:22pm | Your editor
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What to do about the stock market? Here are some responses.

1) From Asia Times, here is the CLSA brokerage's outlook for the Year of the Dog, which begins next week, its now-famous tongue-in-cheek look at the year ahead. CLSA's predicts: “The Dog represents duty and loyalty and is a sign of defense and protection. It’s a good time to be level-headed and to err on the side of caution. Entrepreneurs should stick with their most loyal clients, and investors are advised not to bite off more than they can chew.”

2) James Golub, chief US equity strategist for Crédit Suisse, examines the outlook for the rest of the world vs the US using the MSCI EAFE index (Europe, Australasia, Far East) and the S&P 500. Q4 EAFE expectations: revenues up 6.6%; earnings up 15.3%; earnings per share (EPS) up 14.6%. Among the regions, Japan at 17.4% and Europe at 16.5% top the earnings forecasts. US and Canadian forecasts are lower. Q4 S&P company revenues are expected to rise 7.7%; earnings by 12.7%; and EPS by 14.1%. (North American EPS went up faster than earnings because of stock buybacks, why EPS was so much higher than earnings.)

But back in the USA, earnings surprises were more modest. Among companies which already reported, sales beat by 1.1% vs EAFA's 3.3%. US-Canadian EPS surprises were 4.1% over consensus forecasts while EAFE EPS surprises were 10.2% over forecasts. Among those EAFE firms which already reported Q4 results, EPS beat forecasts in double digits and sales beat by triple the rate for US-Canadian firms. Japanese firms beat with an EPS rise of 15.1% while European companies topped EPS forecasts by 4.5%. Mr Golub concludes that international companies have greater operating leverage than their US counterparts. US firms are delivering stronger earnings growth despite weaker revenue trends. [ED: Mr Golub used weighted S&P, MSCI, Thomson Financial, FactSet, and CS house data for this exercise.]

  1. Paul Tudor Jones, a vintage hedge fund investor, wrote to his clients that his days for betting on market rises may be coming to an end. “To everything there is a season, and a time to every purpose” he wrote, quoting the Bible. Now he expects to face “inflation with a vengeance” which may force the Federal Reserve to accelerate interest rate rises. He wrote that policy-makers should have been “more aggressive” “rejecting the fiscal impropriety associated with the most recent tax cutL. “This market's current temperament feels so much like either Japan in 1989 or the US in 1999. And the evernts that transpired in January make me feel more convinced than ever of this repeating history.” Jones founded Tudor in 1980. [Ed: theextracts are from a 10 page note published by Bloomberg.]

  2. Switzerland-based retiree JH suggests sports or drawing. “When I pick up my pencil I forget about stock markets!” [Ed: he also contributes to]


More for paid subscribers follows from around the world, including EAFE countries for the most part, but also Canada. We have a company report which offers an earnings surprise, and in case you didn't realize it, we are seeing recovery in Japanese stock prices, and several European majors, the easiest way to listen to the Swiss bank.

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