Let’s go over the biggest trend no one is buying.
But first we need to eat our vegetables.
The month’s chart pack is 38 charts covering:
BofA Survey highlights
S&P 500 Earnings estimates
Market Perspective charts
Labor Productivity
The Biggest Trend no one is buying.
By eating our vegetables I mean we check in on those key charts which keep us in the trade for S&P $10,000.
#1 Earnings estimates are going vertical.
#2 Earnings estimate revisions are positive.
#3 Revenues accelerating
#4 Market can’t keep up with 30% earnings growth (P/E derating)
In the chart pack there are other useful market perspective charts. I’ve added US bank lending which we need to track. It’s picking up, which is what we want, but the growth rate in lending is still single digits.
When the bubble gets to its later stages we expect to see double digit loan growth.
Now we check in on what the professional investors think.
#5 Bullishness among Institutional investors is near peak levels. It’s concerning. But will the problem be not that the market declines, but fund managers are in the wrong stocks? Probably.
In the market perspective section note the AAII Bull Bear reading is sitting at average levels. Nothing extreme. So it contradicts the BofA Survey somewhat.
#6 UK is the most hated country.
#7 Consumer stocks are the most hated sector
This bearishness around the consumer is highly consensus and positioning is getting extreme. Many of you have been asking about the alcohol stocks. Could alcohol stocks be the next tobacco stocks?
We need to start thinking about the consumer bull case.
Could consumers and wages somehow do better than we expect in the years ahead?
I put some potential consumer bull case charts in the Labor Productivity section in the chart pack.
#8 The labor force declines in the years ahead.
#9 Workers are cheap relative to how efficient they have become.
Have we lost track of the fact that maybe given all the efficiency improvements workers are now a good deal?
And workers will get even more efficient in the year’s ahead with AI.
Now the biggest trend nobody wants to invest in.
