• Login
  • Register
A Bird's Eye View Blog

Fireside Charts: Earnings Have Sparked a Rally; Is it Sustainable? And China Might be Winning the Trade War

By:BCM Investment Team | Date:Oct16, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

Earnings season kicked off in bullish style yesterday—with nine of the 11 reporting S&P companies either meeting or exceeding expectations—and sparked a market rally. While this eased many's anxieties over market impact of the trade war, our optimism is more cautious as we remember how late-year estimates are often anchored low, and observe that much of the rally is attributable to only a few linchpin companies. Could that be thanks in part to the enduring trend of dividends and buybacks tying up (and exceeding!) cash flow? These companies may want to shore up some reserves, as the U.S. is losing market share—and potentially leverage at the negotiating table—to China, which is continuing to stall on solidifying last week's "handshake agreement" in writing.


1. It is earnings season again! Will these trends continue?


S&P earnings forecasts

Source: Yardeni Research, as of 10/10/19



2. Once again, the current rally has been largely driven by the mega-caps. Less than half of the stocks on the NYSE are above their 200 day moving average...


earnings rally

Source: WSJ Daily Shot, as of 10/15/19



3. Will this excess come back to bite us in the form of over-leverage?


dividends and buybacks

 Source: Capital Group, as of 12/31/18



4. This makes sense as they are both are risk asset classes...


high yield equities correlation

Source: WSJ Daily Shot, as of 10/15/19



5. The green is the U.S.


china us manufacturing trend

Source: WSJ Daily Shot, as of 10/15/19



6. Between the PMIs and data like this, one can argue China has the upper hand...


us china market share

Source: Oxford Economics/Haver Analytics, as of 10/15/19



7. "Fix" being the operative word...


yuan stabilizing

Source: WSJ Daily Shot, as of 10/15/19



8. We wonder what is not counted such as unfunded pension liabilities...


debt to GDP by sector

Source: WSJ Daily Shot, as of 10/15/19



9. And some good news!


us crime declining

Source: The Marshall Project, as of 10/16/19



Are you nervous not having a signed trade deal in place and wanting to keep an eye on how the markets react? To keep updated on the latest trade tariff data, more earnings announcements and the effects on the markets, subscribe to the chart blog for instant or once-weekly notifications and let BCM do it for you!


Subscribe to the   BCM Blog


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.