NCM Macro Review - Narwhal Capitalnarwhalcapital.com/wp-content/uploads/2017/07/Q2-2017... · 2017-07-20 · NCM Macro United States Sector Analysis Year Motor Vehicle and Parts Dealers

NCM Macro Review

JULY 2017

NCM MacroUnited States

Markets

Contents

• United States Macro

• Employment

• Inflation

• Business and consumer investment

• Sector Analysis

• International

• Economic surprises

• Economic analysis

• Currencies

• Commodities

• United States Markets

• Equity market valuations

• Interest rates

• Margins and returns on assets at US companies


Market

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17

S&P 500 YTD


Market

0

500

1,000

1,500

2,000

2,500

3,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

S&P 500 since 2000


Market

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SPX Index - Volatility 30 Day


Market

0

10

20

30

40

50

60

70

80

90

100

1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

SPX Index - Volatility 30 Day


Market

1.2%

28.3%

63.8%

80.0%

88.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Cumulative Frequency of Periods of Volatility


Employment

200

220

240

260

280

300

320

340

Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17

Weekly Jobless Claims ('000s)


Employment

0

2

4

6

8

10

12

52

54

56

58

60

62

64

66

68

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

Unemployment vs. Participation Rate (%)

Participation Rate Unemployment Rate


Employment

0

2

4

6

8

10

12

60

61

62

63

64

65

66

67

68

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Unemployment vs. Participation Rate (%)

Participation Rate Unemployment Rate


Inflation

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Consumer Price Index Y/y

CPI Ex Food & Energy CPI Headline


Inflation

10

20

30

40

50

60

70

80

90

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ISM Price Index

Manufacturing Services


Employment

20

25

30

35

40

45

50

55

60

65

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ISM Manufacturing Employment


Employment

45

47

49

51

53

55

57

59

61

May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17

ISM Manufacturing Employment


Inflation

65

75

85

95

105

115

125

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

DXY Dollar Index


Business Investing

50

70

90

110

130

150

170

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Dodge Momentum Index

The Momentum Index is a monthly measure of

the first (or initial) report for nonresidential

building projects in planning, which have been

shown to lead construction spending for

nonresidential buildings by a full year.


Business Investing

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ISM New Orders

Manufacturing Services


Business Investing

-40

-30

-20

-10

0

10

20

30

40

50

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cap Ex Forecasts

Philadelphia Fed 6-month Outlook Richmond Fed Annualized CapEx


Consumer

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Consumer Confidence


Consumer

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

1976 1981 1986 1991 1996 2001 2006 2011 2016

Autos – Seasonal Adjusted Annual Rate (millions)


Consumer

95

100

105

110

115

120

125

130

135

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Manheim Used Car Value Index


Consumer

0

200

400

600

800

1000

1200

1400

1600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

New 1-Family homes sold

Range bound between 300 and 1,000

since 1963 except for the time period

of 2002 – 2006.


Consumer

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Delinquency Rates - All Consumer Loans (%)


Consumer

80

90

100

110

120

130

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Household Debt to Disposable Income Ratio


Consumer / Inflation

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Job Stayer vs. Job Switcher Wage Growth

Job Stayer Job Switcher 5 per. Mov. Avg. (Job Stayer) 5 per. Mov. Avg. (Job Switcher)


Consumer / Inflation

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Value to Switching (Switching less Staying Wage Growth)

Value to Switching 5 per. Mov. Avg. (Value to Switching)


Sector Analysis

Year

Motor

Vehicle and

Parts Dealers

Furniture and

Home

Furnishings

Stores

Electronics

and

Appliance

Stores

Building

Materials and

Garden

Supplies

Food &

Beverage

Stores

Grocery

Stores

Health and

Personal

Care Stores

Gasoline

Stations

Clothing

and

Accessories

Sporting Goods,

Hobby, Book and

Music Stores

General

Merchandise

Stores

Department

stores (ex-

Leases)

Miscellaneou

s Store

retailers

Nonstore

Retailers

Food Services

and Drinking

Place

1992 14.41% 1.80% 1.47% 4.51% 12.76% 11.62% 3.09% 5.38% 4.12% 1.68% 8.51% 6.08% 1.88% 2.71% 7.00%

1993 15.23% 1.78% 1.56% 4.53% 12.05% 10.98% 2.98% 5.22% 4.01% 1.67% 8.53% 6.02% 1.98% 2.74% 6.93%

1994 16.08% 1.79% 1.69% 4.66% 11.40% 10.40% 2.86% 5.08% 3.82% 1.69% 8.44% 5.89% 2.06% 2.85% 6.67%

1995 16.40% 1.79% 1.83% 4.66% 11.02% 10.06% 2.87% 5.11% 3.70% 1.71% 8.48% 5.81% 2.14% 2.92% 6.58%

1996 16.72% 1.80% 1.82% 4.70% 10.69% 9.75% 2.92% 5.18% 3.65% 1.69% 8.41% 5.66% 2.20% 3.12% 6.46%

1997 16.72% 1.85% 1.79% 4.88% 10.45% 9.51% 3.03% 5.10% 3.58% 1.66% 8.47% 5.62% 2.31% 3.22% 6.58%

1998 16.87% 1.89% 1.82% 4.95% 10.20% 9.26% 3.17% 4.70% 3.65% 1.68% 8.60% 5.47% 2.41% 3.28% 6.64%

1999 17.32% 1.91% 1.78% 4.95% 9.83% 8.94% 3.23% 4.82% 3.61% 1.64% 8.61% 5.23% 2.36% 3.44% 6.44%

2000 17.11% 1.96% 1.76% 4.94% 9.55% 8.64% 3.34% 5.37% 3.60% 1.63% 8.66% 4.98% 2.30% 3.88% 6.53%

2001 17.06% 1.91% 1.67% 4.99% 9.68% 8.75% 3.49% 5.26% 3.51% 1.61% 8.94% 4.78% 2.16% 3.78% 6.63%

2002 16.85% 1.94% 1.72% 5.11% 9.58% 8.65% 3.71% 5.16% 3.55% 1.58% 9.21% 4.57% 2.11% 3.90% 6.81%

2003 16.72% 1.92% 1.71% 5.23% 9.43% 8.51% 3.83% 5.48% 3.55% 1.52% 9.32% 4.27% 2.03% 4.09% 6.96%

2004 16.35% 1.95% 1.77% 5.56% 9.25% 8.32% 3.76% 6.11% 3.58% 1.50% 9.38% 4.07% 1.97% 4.30% 7.05%

2005 15.92% 1.96% 1.80% 5.76% 9.12% 8.21% 3.77% 6.80% 3.59% 1.45% 9.48% 3.86% 1.93% 4.59% 7.12%

2006 15.52% 1.94% 1.81% 5.76% 9.04% 8.12% 3.85% 7.25% 3.66% 1.44% 9.53% 3.67% 1.96% 4.90% 7.28%

2007 15.23% 1.86% 1.78% 5.37% 9.17% 8.23% 3.97% 7.56% 3.71% 1.42% 9.68% 3.51% 1.95% 5.16% 7.44%

2008 13.48% 1.71% 1.82% 5.18% 9.80% 8.80% 4.24% 8.63% 3.74% 1.44% 10.27% 3.43% 1.92% 5.51% 7.86%

2009 12.52% 1.59% 1.78% 4.87% 10.61% 9.52% 4.71% 7.30% 3.82% 1.50% 11.00% 3.49% 1.93% 5.79% 8.43%

2010 13.12% 1.51% 1.72% 4.59% 10.27% 9.21% 4.60% 7.95% 3.77% 1.42% 10.68% 3.27% 1.88% 6.02% 8.25%

2011 13.42% 1.45% 1.65% 4.45% 10.05% 9.03% 4.48% 8.78% 3.76% 1.33% 10.30% 3.03% 1.84% 6.23% 8.16%

2012 13.92% 1.44% 1.60% 4.43% 9.86% 8.85% 4.30% 8.71% 3.75% 1.30% 10.08% 2.79% 1.73% 6.41% 8.23%

2013 14.49% 1.44% 1.56% 4.55% 9.69% 8.68% 4.26% 8.27% 3.72% 1.28% 9.86% 2.58% 1.70% 6.53% 8.19%

2014 14.77% 1.44% 1.50% 4.59% 9.70% 8.68% 4.34% 7.74% 3.63% 1.23% 9.65% 2.43% 1.68% 6.77% 8.33%

2015 15.31% 1.48% 1.47% 4.68% 9.71% 8.68% 4.39% 6.06% 3.59% 1.27% 9.48% 2.32% 1.70% 7.03% 8.74%

2016 15.50% 1.50% 1.39% 4.86% 9.70% 8.67% 4.61% 5.56% 3.52% 1.28% 9.19% 2.15% 1.75% 7.68% 8.35%

Median 15.52% 1.80% 1.72% 4.87% 9.80% 8.80% 3.77% 5.56% 3.65% 1.50% 9.32% 4.07% 1.96% 4.30% 7.05%


Sector AnalysisYear

Health and

Personal

Care Stores

Department

stores (ex-

Leases)

Nonstore

Retailers

Food Services

and Drinking

Place

1992 3.09% 6.08% 2.71% 7.00%

1993 2.98% 6.02% 2.74% 6.93%

1994 2.86% 5.89% 2.85% 6.67%

1995 2.87% 5.81% 2.92% 6.58%

1996 2.92% 5.66% 3.12% 6.46%

1997 3.03% 5.62% 3.22% 6.58%

1998 3.17% 5.47% 3.28% 6.64%

1999 3.23% 5.23% 3.44% 6.44%

2000 3.34% 4.98% 3.88% 6.53%

2001 3.49% 4.78% 3.78% 6.63%

2002 3.71% 4.57% 3.90% 6.81%

2003 3.83% 4.27% 4.09% 6.96%

2004 3.76% 4.07% 4.30% 7.05%

2005 3.77% 3.86% 4.59% 7.12%

2006 3.85% 3.67% 4.90% 7.28%

2007 3.97% 3.51% 5.16% 7.44%

2008 4.24% 3.43% 5.51% 7.86%

2009 4.71% 3.49% 5.79% 8.43%

2010 4.60% 3.27% 6.02% 8.25%

2011 4.48% 3.03% 6.23% 8.16%

2012 4.30% 2.79% 6.41% 8.23%

2013 4.26% 2.58% 6.53% 8.19%

2014 4.34% 2.43% 6.77% 8.33%

2015 4.39% 2.32% 7.03% 8.74%

2016 4.61% 2.15% 7.68% 8.35%

Median 3.77% 4.07% 4.30% 7.05%


Sector Analysis


Sector Analysis


Sector Analysis

NCM MacroInternational

Currencies


Interest Rates


Economics


Economics


Economics


Economics


Economics

NCM MacroMarkets

Commodities

NCM MacroMarkets

Commodities


Markets


Markets


Markets


Markets


Markets

International Economics• Growth is becoming clearer, especially in Europe

• Enthusiasm might mean the near-term move is overdone

• Countries with significant commodity exposure are struggling

• Inflation largely stable, with energy noise

United States Economics• The US appears to be a few years ahead of Europe (e.g. central banks, inflation, growth)

• Business investment is rising and companies are spending on projects (e.g. FDX, ORCL, wage growth).

Manufacturing economy has improved but autos are a concern. Lots of runway for housing

• Wage growth is picking up and short-term interest rates are rising

United States Markets• Valuations are not cheap but understandable

• Relationship between volatility and returns is incoherent

• Secular trends toward ecommerce are accelerating

• Consumer balance sheets are sound and debt/income ratios may fall near-term due to higher income

• Opportunities: enabling technologies as companies implement cap ex, housing

• Concerns: weak commodities, volatility in tech stocks, autos

NCM Macro

DISCLOSURES

Unless otherwise noted, all data accessed via the Bloomberg Terminal. Archived sourcing available upon request.

We certify that the opinions and predictions set forth in Narwhal Capital Management publications are, for better or worse, our professional beliefs at the time of publication. We are not under duress or pressure from any of the corporate entities mentioned, nor do we intend to do business with them on the investment banking or advisory side of things. Nor is this a solicitation or inducement to take action, whether buying or selling, based upon the opinions presented. Again, this publication is a summarization of our professional beliefs and actions that have occurred in the past. We are not “selling” nor attempting to convince the reader of any one particular course of action.

Although we are investment advisors, our publications are not to be construed as investment advice. This publication is a snapshot of our research and opinions. We strive to be as impartial, insightful and accurate as possible. We do base our opinions, analysis, and calculations on information and analysis that we believe to be reliable, but we cannot guarantee that they are either accurate or complete. We may change our minds about any item mentioned and we will not necessarily update them in print. We can guarantee that our research and opinions will sometimes be flat out wrong. This may be from subjective blind spots, mistakes, ignorance, uncertainty of predicting events, or emotional bias. However, we prefer that our predictions/opinions/ research be proven right 100% of the time, and that the stocks our clients own go up, not down, therefore you can assume some level of self-interest and “hope” is present in this and all future publications.

The securities presented in this newsletter are examples of the securities held in Narwhal portfolios and may not be representative of the current or future investments of Narwhal portfolios. You should not assume that investments in the securities mentioned in this newsletter were or will be profitable. We will furnish, upon your request, a list of all securities purchased, sold or held in the portfolio referred to in this newsletter during the 12 months preceding the date of this newsletter.

Narwhal Capital Management, LLC, or one or more of its officers or employees, may have a position in these securities, and may purchase or sell such securities from time to time.

Finally, we must disclose that PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

© 2017 Narwhal Capital Management, LLC

NCM Macro Review - Narwhal Capitalnarwhalcapital.com/wp-content/uploads/2017/07/Q2-2017... · 2017-07-20 · NCM Macro United States Sector Analysis Year Motor Vehicle and Parts Dealers

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