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Showing posts from 2018

CaixaBank: Focus on Fragile Emerging Economies

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Caixa Bank Research’s latest report on the international economy provided insight on the fragility of emerging markets. On June 14th, 2018, the Argentine Peso and the Brazilian Real lead the weakness in emerging market currencies falling 6.1 percent and 2.2 percent on the day. A down day that comes just a day after the Federal Reserve raises rates and reaffirms its hawkishness through the rest of the year.


Emerging market currencies have not just had a weak past 24 hours. Since the beginning of May, Caixa reports that “the Argentine peso has depreciated nearly 20% against the US dollar, the Turkish lira more than 10%, and a large number of currencies (including the Polish zloty, the Brazilian real, the Mexican peso, the Chilean peso and the Colombian peso) have depreciated by between –6% and –4%.” The numbers are quite staggering and suggest the hawkish trend in U.S. interest rates is viewed as a crisis-level threat to the stability of emerging markets’ financial systems. Caixa descr…

World Trade Organization Data: Import and Export Trade Profiles

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Using the World Trade Organization's Trade in Commercial Services bulk data set, the graphic shows each country's available trade data for each category and calculates the top 5 similar countries based on their trade profiles. Each country has an "export" and an "import" profile as well as 5 similar countries for each type of profile. Similar countries will have similar distributions based on the trade categories normalized for size.

Check out the viz on the official Tableau page here.

World Trade Outlook Indicator: On the Brink of a Trade War

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This week, President Donald Trump announced multiple tariffs on some of the United States most active trading partners. Temporary tariff assignments were set to expire on Thursday, and following that expiration, a confirmation that a 10 percent tax on aluminum imports and a 25 percent tax on steel imports was released. Responses were mostly negative on domestic and international fronts with the exception of a positive reception by U.S. aluminum and steel producers. The consensus is that the costs will be passed on to consumers as tariffs will reduce the amount of foreign competition in domestic markets.



Two weeks before the trade announcements, the World Trade Organization’s (WTO) “World Trade Outlook Indicator” suggested a world trade environment that was contracting slightly. The reading fell from 102.3 in February to 101.8 in March.



Six components are used to make up the indicator. All of the data points measure trading activity of different means and different products between cou…

Moody's Credit Markets Review and Outlook: Bullish Default Rates and Treasury Yields

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Moody’s is one of the big three credit rating agencies besides Standard & Poor’s and Fitch Group. Investors around the world look to Moody’s to properly assess the financial health of U.S. companies and therefore the risk in U.S. equities. The well-respected organization also posts weekly reports and analysis on various rates and credit data. Weekly, it outlines the biggest issues in the credit and risk in its “Credit Markets Review and Outlook” typically written by its chief economist, Jon Lonski. This week, the report highlights some dynamics in the equity market that show some sensitivity to certain indicators in the credit market. Since the beginning of 2018, the market has been relatively volatile coming off highs in late January. The worst seems to be over, but the S&P 500 appears to be locked into a trading range. Moody’s analysis suggests the market will resume its growth based on falling default rates.
Moody’s states that “roughly 88 percent of the 209 year-over-year…

Iran's Economy: A Statistical Profile

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Recently, President Donald Trump has announced the jarring decision to pull out of the Joint Comprehensive Plan of Action (JCPOA) also informally known as the Iranian nuclear deal. Since his campaign, he has suggested the deal was a poor one for the United States, and that if he was elected president, he would look to rework the deal. To the dismay of the other members of the United Nations Security Council who signed the deal, he followed through on his promise.
In the deals place, President Trump has reintroduced the idea of economic sanctions on Iran which were lifted at the beginning of 2016. The lifting was supposed to help propel Iran to new economic growth allowing oil exports to resume and foreign money to flow. In a paper written by an IMF economist, three benefits were supposed to take effect:
Exports of oil and gas would resume and cause a “positive external demand shock to the Iranian economy.”Accessibility to financial services, specifically “restored access to the intern…

Commodity Futures Trading Commission: LNG Market Report

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The U.S. Commodity Futures Trading Commission (CFTC) produces data and reports on the futures, options, and swaps reports. On May 16th, 2018, it released research and developments in the Liquefied Natural Gas (LNG) market. The paper provides broad background information as well as a look forward into projections for U.S. exports and productions. Combining perspectives from organizations around the world, the CFTC is able to develop a holistic view from different forecasting models.



The CFTC sees three major market forces in the LNG futures market. As natural gas is the only fossil fuel with “a growing share of global energy,” global demand for it and LNG is expected to expand. The lower costs of producing natural gas and LNG, a result of rampant shale production, enable demand increases to be met with increases in exports. Because producing and exporting LNG require infrastructure, the level of investment in that infrastructure will be a huge force in determining the complexion of th…

FactSet Earnings Insight: First Quarter Earnings in Review

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The FactSet Earnings Insight report provides summary statistics for the latest trends in the earnings of the S&P 500 companies. The dynamic paper that is constantly updated to stay with the most recent earnings trends addresses earnings estimates, earnings guidance, revenues, and more. The report is available here and will remain updated on that link, so be sure to check back every quarter to see the new data posted by FactSet.

From FactSet
Earnings season for the first quarter of 2018 is coming to a close with 93 percent of S&P 500 companies having already reported. Looking back, the first earnings season of the year proved to be a success despite broad volatile trading. According to FactSet, 78 percent of S&P 500 companies reported a positive EPS surprise and 77 percent reported a positive sales surprise. If the 78 percent number holds, it will be the highest recorded by FactSet So far, on average companies are posting earnings 7.5 percent above what is expected. This s…

2018 Rating Global Leaders: Trump's Trade Policy Disappoints

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Gallup is famous for its presidential approval rating surveys in the United States with numbers that are cited often by politicians in campaigns and interviews. The Rating World Leaders report is an expansion of that survey where Gallup opens up the question of approval to the rest of the world. Country-by-country, the survey determines approval ratings for almost every country in the world on an annual basis. In the 2018 report, the Trump administration is put on the stage. Here are some highlights of the report.

To start, here’s a visual of the world ratings which are represented as a percentage of individuals who “approve,” “don’t approve,” or abstain. The map above shows some interesting trends. The entirety of the Western hemisphere across the Atlantic Ocean is in red. The Trump administration’s insistence on reevaluating NAFTA probably must do a lot with disapproval in this area. However, the fact that there is no green is more telling than anything. Most of Europe is in red, w…

Quarterly Report on Federal Reserve Balance Sheet: Fed Diet Starts

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Recently, the Federal Reserve released the March 2018 edition of the Quarterly Report on Federal Reserve Balance Sheet Developments a document that provides updates on the changes in assets and liabilities of the central bank and how they coexist with the changes in interest rate policy. With the FOMC announcing an interest rate increase at the first meeting led by the new chairman, Jerome Powell, some changes in open market operations are expected to be the result.
The February 28th, 2018 balance sheet was released at the end of March 28th and showed the result of the Federal Reserves first attempt at shrinking the balance sheet.

ItemChange (in billions)PercentTotal Assets-$68-1.5%U.S. Treasury securities-$41-1.7%mortgage-backed securities-$11-0.6%
The table above shows the two areas the Federal Reserve drew from (both included in the total asset draw). U.S. Treasuries were understandably the largest decrease on the asset side with an almost 2 percent decrease. Mortgage-backed securi…

Bureau of Economic Analysis' Personal Income and Outlays: Inflation Ticks Up

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On Thursday, March 29th, the Bureau of Economic Analysis (BEA) released the monthly readings of personal income and outlays for the month of February 2018 as well as revisions of January 2018 numbers. Raw data from the past five months is published for personal income, disposable personal income, personal consumption expenditures and PCE price index.
Readings were mostly flat in February with personal income growing 0.4 percent for the third straight month and disposable personal income growing 0.4 percent as well after an abnormal January. The BEA noted that the increase in personal income was caused by "an increase in wages and salaries," an optimistic note as wage growth over the past couple of years has been much needed. Personal consumption expenditures remained growing at a 0.2 percent pace and continued to underperform the last three months of 2017 (although that might be due to seasonality trends). With tax reform passed, eyes will be on this number to grow as consu…

The "Reversal" Play: A Study of Company Size, Industry, and Sector

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In technical analysis, the “reversal play” is a well-known strategy used by traders to take advantage of imbalances in momentum. The strategy roots itself in the idea of mean-reversion, large decreases in the share price of a stock are typically followed by a period of increases as the value roughly regresses to a mean. From a fundamental point of view, the investor assumes that a sudden spike in share price (which this data looks at) is not accompanied by an immediate fundamental change, therefore, the company has become undervalued.

This phenomenon has been heavily researched before showing that this strategy is capable of producing excess returns. Marc Bremer and Richard Sweeney in “Reversal of Large Stock-Price Decreases” (1991) found that “extremely large negative 10-day rates of return are followed on average by larger-than-expected positive rates of return over following days.” Bremer and Sweeney found that the recoveries they studied were relatively slow and “inconsistent with …