This page has been archived and commenting is disabled.
The 10 Most Important Themes To Watch This Summer
As Deutsche Bank notes poetically, "April showers brought May flowers" but adds "Watch out for June thunder storms." Why the caution?
"Because S&P reached a new high of 2130 last Thursday on an 18 trailing PE, the highest since 2010 despite anemic EPS growth expected this year. Both EPS and GDP are struggling to expand in 1H, putting the burden for a decent year on 2H. A 2H rebound is likely, but trend growth is very uncertain. Given the growth outlook, it will take long-term Treasury yields staying very low when the Fed starts hiking to support an 18 or higher trailing S&P PE. This moment of truth for long-term yields upon Fed signals of a Sept hike is crucial for summer stock performance, but we also see other important summer issues to watch."
Here are Deutsche Bank's 10 themes and "summer issues" to keep an eye on as we leave May behind and enter June:
- Is Fed a “go” or “no-go” for Sept liftoff? We expect a Sept hike on falling unemployment even if US GDP growth stays slow. We think the Fed will issue more guidance that the FF rate is unlikely to exceed 2% over the next 2 years.
- What does this mean for the dollar? We expect further dollar appreciation, DXY ~100 and Euro down to near $1.00 by yearend, but not much stronger than that if Fed hikes appear likely to stay slow and plateau at 2% in 2017.
- How do long-term Treasury yields react to the start of Fed hikes? Long-term yields could spike up to about 2.8% this summer upon strong job reports, but should stabilize there if the dollar climbs and unit labor costs don’t accelerate.
- Will US GDP bounce back with ~3% growth for the rest of 2015 after 1Q’s contraction? What is a realistic est of trend US growth for the next few years? We see a moderate bounce and 2.0-2.25% trend assuming better productivity.
- Has the low in oil prices been set or need to be retested or new lows? We think WTI is capped at $70 through 2016 provided no geopolitical flare-ups. Oil prices are likely to drift down near-term as US and int’l producers vie for share.
- Greece? Is Europe prepared to pull the plug if no agreements by June end?
- US Supreme Court ruling on plan subsidies on federally set up exchanges? The law says subsidies can only be paid through state established exchanges. A decision is expected in June and if disallowed the Administration will need to turn to Congress to pass a law allowing such subsidies and this will open the door to other ACA modifications and maybe a foreign earnings repatriation holiday comes along with this legislation. There are risks to managed care stocks in this process and it is the only industry we are not OW within HC.
- Does the US put boots on the ground in Iraq again to deal with ISIS? This is becoming a problem for President Obama, but we doubt any ground action.
- China and other EM economies? US, Europe and Japan might be in a long lasting period of synchronized slow growth, but EM deceleration seems likely to continue and thus moderate global growth with vulnerability to shocks.
- US Presidential election. By late 2015 a republican favorite should emerge. This could be a very heated campaign even if Hillary leads. It will raise uncertainties on many US policies including corporate taxes, healthcare, banks and energy, and it might politicize issues related to the Fed and the dollar.
»
- 30544 reads
- Printer-friendly version
- Send to friend
- advertisements -
11. How long will it take the USSA to start a major world war?
12. Yields ....we excpect significant deterioration of the Transjordan margin calls followed by an appreciation of the North Siberian Rasputinov derivatives and a lot of interest no longer available in Western Eurostan. However; at the end of the period there should be significant opportunities for anybody left alive.
13. Nobody gets out alive.
14. Watch yer ass.
(Actually # 1 on my list.)
Themes? That's what we're calling propaganda these days?
Point 3. If the Fed tightens, I'll betchu the fucking ranch that long term treasury rates Fall, not Rise.
The expectations will be for, in the face of an already tepid level of economic activity, that tightening now will be tantamount to what the Fed did during the first leg down of the Great Depression under Andrew Mellon, further exacerbating the the downturn and collapsing both credit demands and inflationary expectations.
The Fed tightening right now is the Best Thing Going for Long Bonds.
Lemme clue you people in. If it were real, in terms of economic activity, etc., that the Fed needed to tighten, it would not be discussed ad infinitum as per Angles on Heads of Pins, it would simply be over and fucking Done With. Apparently, most practitioners (a la ZH's story the other day) have never ever seen robust economic growth or real Fed restraint.
It would make yer balls shrink, it would. And that ain't now.
Point 8. We already have US boots on the ground in iraq.
Aaaararrarraragggghhh!
Agree 100%. Been arguing with our bond PM for a while now. The FED cannot hike - meaning they MAY hike but whatever their decision is it'll be wrong. I can't wait for the volatility that's going to explode in the next 6 months.
Whats 2% here and 3% there when its based upon 99% bullshit?
As an American businessman a salesman for 30 years there is no trust and where no trust exists no sales are made. I wish that this collapse would just go ahead and happen.I am better prepared for this than what we are experiencing
Cut the crap with the metaphors. In June you are literally going to have to watch out for the thunderstorms. The clouds have begun to rain more water than what is in them. What we have here is dimensional leakage that's enttered into this part of the galaxy.
Jade Helm 15, and what it really is all about, id say that should have made the watch list for this summer
All I can say, with certainty, is that I and/or you are on the watch list for the summer.
I have a wormhole on my property (in the back yard, near the shed), so all that excess water drains off to another part of the galaxy. I need to keep the leaves and branches out of the wormhole so it doesn't get clogged up.
with GPD at around -1 for Q1 and estimated at 1 maybe for Q2, how on earth is the fed going to raise rates in sept???
This analysis is just supporting the fed and its wishful thinking.'
The fed is trying to talk the economy up and using propaganda to keep businesses from getting scared.
Keep in mind that they use aluminum cooking pots and utensils at all the Federal Reserve commissaries.
Also many prescription drugs will addle the thought process if not prescribed in correct dosages.
What about Isil taking Baghdad, thereby sewing the seed of a legitimate Caliphate further ,which will then likely accelerate the following towards them, which will then likely see an increase wave of international attacks in Western cities , which will then spark off a ' Christian ' extreme prejudice reaction against the wider muslim communities ?
Thats what's coming if Baghdad falls.