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A Bird's Eye View Blog

Fireside Charts 2.8.19

by : BCM Investment Team | POSTED: Feb08, 2019 | CATEGORY: Equity, Economics, Market Highlights, Fireside Charts

Which emotion is driving the market right now? At the end of 2018, we saw extreme fear, but now investors are moving towards greed. With the U.S. oil trade deficit nearly behind us, we are poised to become a net exporter of both oil and natural gas. Service jobs in the U.S. have been driving  employment recovery since ’07-‘09 recession. Industrial margins are under severe pressure in China. Along with Australia, India has unexpectedly cut its benchmark rate. Why is this  happening in these supposedly growing economies? 

 

1. Simple emotions drive too many investment decisions....

 

 2.8 chart 4-1

Source: CNN, as of 2/7/19

 

 

2. As someone who remembers the OPEC-led oil crisis, the gas lines and "peak oil", it is amazing that the U.S. is about to become a net exporter of oil.

 

2.8 chart 2

Source: WSJ Daily Shot, as of 2/7/19

 

 

3. ...And natural gas.

 

 2.8 chart 3-1

Source: U.S. Energy Information Administration, as of 2/7/19

 

 

4. An interesting look at the U.S. job recovery.

 

 2.8 chart 1

Source: Bianco Research, as of 2/6/19

 

 

5. While not surprising, this is disconcerting. Who is going to buy our ever-increasing supply of debt?

 

 2.8 chart 5

Source: U.S. Treasury Department; as of 2/08/19

 

   

6. China is already quietly stimulating its economy but a rate cut may also be in the cards as their economy may be in "trouble". 

 

 2.8 chart 7

 

Source: CEIC, Gavekal Data, as of 2/8/19

 

 

7. China's manufacturing sector is now firmly in contraction mode and the trend is down...

 

2.8 chart 8

Source: Macrobond Financial, as of 2/8/19

 

 

8. German manufacturing woes deepen as well...

 

 2.8 chart 9

Source: WSJ Daily Shot, as of 2/7/19 

 

 

9. Together with Australia, this is the second surprise cut in rate by a Central Bank this week. If these economies were growing, wouldn't rates be increasing?

 

 2.8 chart 6

Source: WSJ Daily Shot, as of 2/7/19

 

The BCM Investment Committee has spent countless hours over their careers trying to understand when large drawdowns are more likely to occur. Nevertheless, nobody knows exactly when it will happen but we know for one thing that it will. The probability of another 20% or more drawdown is higher than you may expect.

 

Are you willing to enter that market with your current portfolios? Why take those chances without strategies that can grow AND become defensive when necessary?

 

 

The Probability of Another 20%+ Drawdown is Higher Than You Might Expect

 

 

Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.