Is now the time in the The Cycle to chase a fledgling rotation out of quality, large-cap growth and into levered small caps that don’t have “secular” growth curves to get excited about in Wally World price-to-sales multiple turns?
We don’t think so. If anything, this morning’s global economic data should serve as a stark reminder that the global industrial cycle continues to deteriorate at a “worse than expected” pace amid a broadening earnings recession here in the US:
- China Manufacturing PMI flat at 49.4 in JUN
- Japan Manufacturing PMI ticked down to 49.3 in JUN from 49.5 in MAY
- Eurozone Manufacturing PMI ticked down to 47.6 in JUN from 47.7 in MAY
- Australia Manufacturing PMI ticked down to 49.4 in JUN from 52.7 in MAY
- Russia Manufacturing PMI ticked down to 48.6 in JUN from 49.8 in MAY
- Indonesia Manufacturing PMI ticked down to 50.6 in JUN from 51.6 in MAY
- Taiwan Manufacturing PMI ticked down to 45.5 in JUN from 48.4 in MAY
- South Korea Manufacturing PMI ticked down to 47.5 in JUN from 48.4 in MAY
- South Korean Exports decelerated to -13.5% YoY in JUN from -9.5% in MAY
- 18 of 497 S&P 500 constituents have reported Q2 earnings thus far with EPS growth tracking down -18.3% YoY on an aggregated basis and every sector in the red
While some investors might prefer to wait for President Trump to put out the next fire he has yet to start, we prefer to take our cues from The Cycle.