market folly

Market Strategist Jeff Saut, along with technician Art Huprich and economist Scott Brown have put out an interesting compilation of data/charts entitled 'Gleanings.'  In it, they incorporate economics, fundamentals, technical analysis, and quantitative analysis. 

Overall, they see equity optimism due to the "open-ended central bank's 'put option,' QE3."  Here are some of the macro and technical highlights from what they're seeing:


Key Economic Takeaways

- Fed is targeting mortgage rates and 30-year rates recently hit a generational low (3.38%)

- "Good time to buy a house" helps housing as prices are improving

- Financials have traded higher & they think that continues due to low valuation, balance sheet clean-up, and housing's stabilization

- Inflation-adjusted consumer spending continues to trend at moderate pace

- Aging fleet of autos have supported improving trend in auto sales

- Home sales & construction activity are up double digit percentages since last year

- PCE Price Index is trending below Fed's 2% target (other core inflation measures have been drifting lower as well)

- Economic wildcards: gasoline and the election

- Economic risks: Europe, fiscal cliff, and debt ceiling.  (We recently highlighted Kyle Bass' thoughts on Europe and also presented Ray Dalio's interview on macro topics).


What The Technicals Say

- "Bernanke put" backed by Quantitative Easing

- Favorable 'seasonal' market & election cycle historical trends should backstop any declines into year-end

- Charts suggest having exposure to financials via selective exposure.  (We've noted how many hedge funds have bet on AIG this year).

- Charts are bullish for Homebuilders ETF (XHB) and Home Construction ETF (ITB) over the long-term, though a mid-term pullback would be healthy

- Bullishly configured price trend in S&P Consumer Discretionary sector


Embedded below is their presentation 'Gleanings' full of charts:




For more from Jeff Saut,this week we posted up his commentary examining how many investors are underperforming this year.