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A Bird's Eye View Blog

Fireside Charts: S&P 500 Earnings Expectations, U.S. Federal Government Mandatory Spending will Overwhelm Revenue, Chinese Banks Expose Skeletons in the Closet

By:BCM Investment Team | Date:May29, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

The latest in 2019 S&P 500 earnings predictions is not a healthy earnings outlook. Yet, U.S. consumer confidence is at a multi-year high. U.S. grains picked up in the latest percentage change for commodities like gold, crude oil, and copper. The U.S. federal government's interest expense and mandatory spending will overwhelm revenue around 2030. The bond curve has gotten steeper just in one week. Finally, China's first bank seizure in 20 years spooks investors as over 10% of banks are deemed risky in the People's Bank of China test. 

 

1. Of course analysts often struggle to get their predictions "right"...but this is not the picture of a healthy earnings outlook...

 

 Source: Bloomberg, as of 5/29/19

    

 

2. A great example of our human bias and emotions at work over time...

 

 5.29 chart 7

Source: Bloomberg, as of 5/29/19

   

 

3. Will the short-covering rally extend?

 Source: Bloomberg, as of 5/28/19

 

 

4.  A big miss out of the Dallas FED...into contraction.

 

 

Source: WSJ Daily Shot, as of 5/28/19

   

 

5. While crude oil has had a stellar year...

 

 

 Source: Thechartstore.com, as of 5/28/19

 

   

6. ...Energy stocks have not...

 

 

Source: Thechartstore.com, as of 5/24/19

  

 

7. Spending beyond our means mandates more debt, more debt requires more interest payments, which widens our deficits and requires more debt...

 

Source: Gavekal Data, as of 5/29/19

 

 

  

8. The yield curve inversion has gotten steeper...

 

Source: WSJ Daily Shot, as of 5/28/19

 

   

9. How low can UST yields go?

 

 

 Source: WSJ Daily Shot, as of 5/21/19

 

 

10. Will a continued Chinese economic slowdown begin to expose skeletons in the closet?

 

5.29 chart 9

Source: 2018 China Financial Stability Report, as of 5/29/19

   

  

11. Note the scale on the left...exports of tariffed goods have fallen 40-50%...

 

 Source: USITC, as of 5/28/19

 

In a cloud of trade concerns, many overlook China's debt and banking crisis. On May 24th, the China Banking and Insurance Regulatory Commission (CBIRC) overtook Baoshang Bank as it posed serious credit risks. The banks own bonds were suspended from trading. This was an extremely rare move, underlining the core of China's banking issue in Chart #10.

 

How would you feel if your nation had bank seizures and only a few banks that were deemed "low-risk"?

 

Tell Us Your Thoughts on the Chinese Banking Crisis

 

 

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.