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Existing-Home Sales: Housing Head-Fake Or Big Breakout?

Takeaway: Growth in Existing Home Sales slowed to +3.0% YoY but the main callout was that the share of sales to 1st-time buyers rose to 33%. Headfake?

Existing-Home Sales: Housing Head-Fake Or Big Breakout? - existing home sales 7 22 16

 

Another rate of change slow-down in US Existing Home Sales?

 

Yup.

 

The breakdown is as follows:

 

Decent print but no real surprises. Growth in Existing Home Sales slowed to +3.0% YoY in June but the main callout was that the share of sales to 1st-time buyers rose to 33%, marking the highest percentage since July 2012 as unit sales increased to the highest level of the cycle at 1.84M.

 

The trend here is important because any next leg higher in transaction volumes will require resurgent 1st-time and entry level buyer demand. The past 3 years have been littered with single-month breakout headfakes and false optimism so we’re interested to see if the strength can confirm next month. 

 

The more important housing release will be next week’s Pending Home Sales data for June – which will give us the lead read on sales in the existing market for July.  

 

Bottom Line: You'll be reading about the Housing slowdown in newspapers, in 3 months.


Are Old Wall Consenseless Earnings Expectations Out To Lunch?

Takeaway: The S&P 500 hit all-time highs on cycle-high buyback activity and a new cycle high (overly-optimistic) forward multiple.

The current S&P 500 forward multiple is at a new cycle peak on earnings expectations that assume positive earnings growth by Q3 2016, +9% in Q4 2016, and +16% and +14% by Q1 and Q2 2017 respectively. Starting in Q4 of this year, positive earnings growth expectations are baked in for every sector for three quarters through Q2 of 2017.

 

Are Old Wall Consenseless Earnings Expectations Out To Lunch? - earnings expec

 

In other words, the S&P 500 hit all-time highs on cycle-high buyback activity and a new cycle high forward multiple. Note the optimism embedded in those earnings expectations as seen in the chart above.

 

Estimates too high? You decide.

 

Emblematic of the ongoing earnings recession, here's how Q2 2016 earnings are shaking out so far. Still bullish?

 

Are Old Wall Consenseless Earnings Expectations Out To Lunch? - earnings q2 7 22


Daily Market Data Dump: Friday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Friday - equity markets 7 22

 

Daily Market Data Dump: Friday - sector performance 7 22

 

Daily Market Data Dump: Friday - volume 7 22

 

Daily Market Data Dump: Friday - rates and spreads 7 22

 

Daily Market Data Dump: Friday - currencies 7 22

 

Daily Market Data Dump: Friday - commodities 7 22


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CHART OF THE DAY: What Happens To S&P 500 When VIX Is Below 13

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more.

 

"... 1 Factor Model:  In the Chart of the Day below we simply show VIX vs S&P500 (S&P500 is inverted on right axis). 

 

What you’ll simply notice is how simply effective it is to take down gross exposure and tighten net exposure when VIX goes <13.   

 

Global risks haven’t “greatly moderated” so building exposure into VIX 10/11/12 embeds the assumption that those risks cumulate latently with no impact on risk premiums or prices.  That seems like a pretty heroic assumption."

 

CHART OF THE DAY: What Happens To S&P 500 When VIX Is Below 13 - 7 22 16 CoD2


About Everything: The Decline of the Film Industry & Its Investing Implications

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses why the movie industry is in decline and breaks down the broader implications for investors.

 

Click here to read the associated About Everything writeup.


Cartoon of the Day: A Bear Tale

Cartoon of the Day: A Bear Tale - Europe three bears cartoon 07.21.2016

 

Drawdowns from respective 2015 highs:

 

  • Germany, DAX: -13.7%
  • Italy, FTSE MIB: -30.3%
  • France, CAC: -16.1%
  • Spain, IBEX: -25.8%

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