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A Bird's Eye View Blog

Fireside Charts: Inflation Takes Off (In Some Sectors), Earnings Season Rolls On, U.S. Crude Oil Production Sets Record High

By:BCM Investment Team | Date:Nov15, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

“Fed officials should go to the doctor if they think there is no inflation in the economy,” say Chris Rupkey, chief economist at MUFG in New York. Medical care, education, and housing costs are soaring—and significantly outpacing the rest of the market. Healthcare earnings surprised in more than one way in Q3 (see the details in the charts below)... could such aggressive pricing increases be to thank? Meanwhile, despite 70%+ of companies beating earnings estimates as of last week, EPS growth rates have established some downward momentum in the last year. While record performance from the S&P 500 has offered some insulation to the U.S., how much of that strength is owed to the mega-caps, and can their dominance go on forever? U.S. crude oil production hit a record high last week, and in 2020 we're expected to become a net energy exporter for the first time since the 1953. Are there any other trends you'd like to see come back from the '50s?


1. This topic came up last week in San Francisco...


CPI inflation

Source: Deutsche Bank Research, from 11/14/19



2. Inflation for eating out is almost double the U.S. CPI


U.S. CPI dining out

Source: WSJ Daily Shot, from 11/14/19



3. Healthcare earnings surprised in Q3; are rising costs trickling through to earnings?


healthcare earnings Q3

Source: State Street Global Advisors, as of 10/31/19



4. But overall, earnings growth has established a downward trend. 


2019 earnings per share

Source: State Street Global Advisors, as of 10/31/19



5. As the mega-caps get bigger, the GAP between the market cap weight of the S&P 500 and the equal weight S&P 500 continues to widen.


equal vs. market cap weight S&P 500

Source: WSJ Daily Shot, from 11/14/19



6. Another record high:


US crude oil production

Source: WSJ Daily Shot, from 11/14/19



7. It took a decade, but the excesses of the Great Recession have finally been absorbed by our financial system. Better times for banks ahead?


foreclosures % of loans

Source: WSJ Daily Shot, from 11/14/19



8. What's in your... index? The BBAB has significantly increased duration and risk; are your clients aware?


BBAB index duration

Source: WSJ Daily Shot, from 11/15/19



9. Consumer confidence has soared to ~10 year highs, but it looks like they can feel a turn coming...


consumer confidence

Source: State Street Global Advisors, as of 9/30/19



10. A disappointing GDP print from Japan:


Japan GDP QoQ

Source: WSJ Daily Shot, from 11/14/19



11. The U.S. is not the only country to lose its manufacturing base to china and other countries...


Canada manufacturing % of GDP

Source: Desjardins Capital Markets, from 11/14/19



12. There is a negative trend forming...


China industrial production YoY

Source: WSJ Daily Shot, from 11/14/19



Consumer debt in the U.S. hit a record ~$14 trillion earlier this year and is higher in 2019 than it was during the financial crisis. With 2020 presidential campaigns kicking into high gear, debt—particularly of the student variety—has become a hot topic. But all debt is not created equal. Click below for more detail from BCM Portfolio Manager & Managing Partner Dave Haviland. 


The Good, The Bad, and The Ugly: What No One Tells You About Debt



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.