Recap 3-07-14


On a trailing P/E basis, the S&P is now back at the Dec 31 highs. There may be some more sell orders there, but valuations are still too cheap relative to other asset classes and the macroeconomic backdrop. By my calculations, the S&P is discounting a long term real GDP growth of ~2.75%. This compares to 30y TIPS real yields of just 1.4%, and projections by the Fed and CBO of ~2.25%. Ceteris Paribus, (obv a big caveat here) that implies a base case P/E increase of 25% from here and a bull case P/E increase of 100%.


  • US Employment:
  1. Payrolls printed 175k vs 149k exp. The previous print was revised higher by 16k to 129k
  2. Unemployment ticked higher to 6.7% vs 6.6% exp and prev. The participation rate was unchanged
  3. Hourly earnings growth was better than exp but Weekly Hours was worse.

Canada Employment

  1. Employment declined -7k vs +15k exp and 29.4k, driven by part time employment
  2. Unemployment was unchanged at 7.0% exp
  3. The participation rate declined to 66.2 vs 66.4 exp and 66.3 prev

China suffers its first corporate bond default – three retailer holders of a bond from Shanghai Chaori Solar told the FT they received only a small fraction of the interest owed Thurs night and didn’t expect any more money.

Upcoming Data:

  • Weekend: China Trade Balance, PPI
  • Mon: Japan Current Account, Eco Watchers Survey, Canada Housing Starts, USDA Report, NAB Business Confidence
  • Tue: UK IP
  • Wed: NZ House Sales, Turkey Current Acct, RBNZ, Japan Machine Orders, Rics House Price Balance, Australia Employment
  • Thu: ChinaData, US Retail Sales, Jobless Claims, BoJ Minutes
  • Fri: US Core PPI, U Michigan Confidence

2 thoughts on “Recap 3-07-14

  1. Would you mind unpacking your equity model a bit? I’m having trouble joining the dots.

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