While today’s data releases continue to point to a mixed macro picture — factory orders up, durable goods orders down — the following denote troubling trends.
Keep in mind, this data precede the coronavirus outbreak, and, make no mistake, China is huge when it comes to the global industrial sector (over twice as huge as it was during the SARS outbreak):
Q4 earnings releases to date; note the sizable contraction in both revenue and earnings growth in the key industrial sectors. This look supports our present assessment; solid consumer spending, weak business investment: Click each insert below to enlarge…
Caterpillar global sales (yes, very telling when it comes to global economic activity/growth) contracting globally and in every region measured:
Ratio of stock performance in economically-sensitive versus economically-defensive sectors:
Note: Our present core allocation reflects a marked shift from econ-sensitive to econ-defensive sectors.
The S&P 500 Index (in white) versus the S&P 500 Equal Weight Index (in green) so far this year says this latest rally is highly concentrated; which is somewhat of a risky setup: