The Boom-Bust Barometer (Commodity Prices/Unemployment Claims) has had a very high correlation with stock prices over the past decade. The rise in unemployment claims has driven it lower. We will wait to see if the end of the government shutdown will bring unemployment claims back down. It was only modestly lower this week (-15k).
Advance Auto Parts (ticker: AAP) gapped up today on the open and finished the day 16.5% higher on the news that it was buying General Parts International, Inc for $2 billion in cash. This phenomenal one day advance, however, doesn’t look like it changes the longer-term trend for AAP.
Trading at .2x sales Fujitsu appears relatively cheap, but the stock just continues to go down relative to the MSCI World Index and has recently decisively broken a support level that has been in place since 2012.
Normally cyclical sectors outperform counter-cyclical sectors when the Citigroup Economic Surprise Index is rising and underperform when it is falling. The Citi Econ Surprise Index is now down since 9/12/13, having fallen over 25 points.
We’ve noted before how we group all 1607 companies in the MSCI World Index into deciles based on various fundamental and market factors, and then observe which factors were significant in explaining performance over various time periods.
We track the relative performance of the cyclical sectors (consumer discretionary, financial, energy, industrial, materials, technology) compared to the counter-cyclical sectors (consumer staples, health care, telecom, utilities) to gain an insight into leadership within the equity markets. Usually copper–the metal with a Ph.D in Economics–moves in synch with the relative outperformance of the cyclicals.
Germany’s DAX index closed at all-time highs on Tuesday:And, while the rest of the European equity indices have performed well so far this year, few are close to achieving the same milestone:
The NAHB Housing Market Index ticket down from 57 to 55 in October. However, the index has shown a surprisingly strong negative correlation with the Unemployment Rate (Index goes up, Unemployment rate goes down). This relationship would suggest that the unemployment rate continues to fall over the next 18 months.
In keeping with the familiar trend among European data releases, Germany appears to be the lone bright spot in an otherwise lackluster survey of economic sentiment:
We’ve noted before the recent underperformance of ”defensive growth” stocks (Health Care and Consumer Staples stocks) so we thought we’d dive into the details to get a better understanding for the drivers of this relatively sudden turn in performance, since these two sectors (and Health Care in particular) have performed admirably this cycle.