Yardeni increases outlook on stocks

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Uranium is going nowhere

Uranium stays at $80. 

Commodity outlook

Oil producers are going to have a hard time. 

Yardeni decreases outlook for S&P500

Yardeni decreases his outlook on the S&P500 from 4800-5700 to 4400-4950.

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Yardeni Increases Outlook Again

Yardeni upped his forecast from 4500 to 4800 in 2021, from 5000 to 5200 in 2022 and from 5400 to 5500 on the S&P in 2023.

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Outlook Commodity Prices - BMO Capital

Iron ore is about to crash according to BMO Capital. I would take profits in Vale.

 

Gold Forecaster Index: Caution Advised

Be cautious, stay in cash.

What happened since September 2017?

The economy has seen a significant transformation since September 29th, 2017, when the debt ceiling was raised and U.S. debt went up by $800 billion (see chart below from Wolfstreet). From that day on, everything changed.

Read the analysis here.

Gold outlook: Bull or Bear?

Gold (GLD) and silver (SLV) were smashed the first week of October 2016 at the same time when the Shanghai Gold Exchange was closed for a week. It was the perfect moment to talk about interest rate hikes and surely we saw Richmond Fed President Jeffrey Lacker tout that interest rates need to rise. This promptly induced a massive 1000 tonnes of paper gold selling.

The question is: "Are we in a correction of a bull market or are we seeing a dead cat bounce and resuming a bear market?". The chart below (source: Kitco) suggests we will see a period of consolidation before we can rise higher.

Read the answer here.

Leading indicators suggest recession coming

With the stock market at all time highs, backed by strong July jobs numbers where 255000 jobs were added, let's contemplate on what to expect in the coming months. Jobs numbers are considered to be a lagging indicator, so it doesn't reflect the actual situation. So I will be going over the leading indicators in this article.

First of all, each month the St. Louis Fed reports the leading index on its site. The leading indicator for June trended down. So we can predict that the economy is not doing that well. The coincident indicator is trending down as well. So the actual situation isn't that good either.

I will briefly discuss the following leading indicators and there are quite a lot of them: bond yields, ISM manufacturing PMI, lumber prices, building permits, trade deficit, consumer sentiment, art prices, employment to population ratio, fed funds rate, debt to GDP, corporate earnings, GDP output gap, yield curve, credit spread, capacity utilization, business inventory to sales ratio.

You can find the analysis here.

Market Outlook

In the past few weeks we have seen a lot of changes in investor sentiment. It all started at the end of September 2014. We had a lot of bad economic news coming. A falling labor participation rate, lower PMI readings, falling consumer sentiment, lower factory orders, declining oil demand, falling home prices, lower GDP growth revisions, declining bond yields, a drop in Dow transportation index, lower Baltic Dry Indices, lower Chinese power consumption growth and more recently falling retail sales.

As a result, the Dow Jones has posted losses for 2014. What's most interesting is that volatility has now started spiking, which is never a good sign for stocks (see chart below from Google Finance). Volatility has seen similar spikes in 2008, 2010 and 2011 which all resulted in a correction in stocks.

On the other hand, gold has been very strong this year based on a higher fear index and higher volatility. Since October 2014 we have seen an additional anomaly where oil goes down and gold goes up. I see this as a buying opportunity in the gold and silver mining sector.

Oil has been declining due to a lower global oil demand (see chart below from Yardeni Research) and due to a higher supply from the shale gas boom in the U.S. and increasing supplies from Saudi Arabia. Though, I expect that at these prices of $80/barrel WTI crude oil, we will see a huge decline in shale gas production going forward. Shale gas producers can't break even at these crude oil prices at $80/barrel.

Especially those shale gas companies with a high debt load will be the hardest hit. For example Continental Resources (CLR), which is a bet on the Bakken shale play, has had a major decline in stock price since the oil price made its dive in October 2014 (see chart below of  Continental Resources CLR).

There are many reasons why markets are correcting now.

Read the analysis here.

Market Outlook

(First I want to thank Jeff for giving me an idea to go over our correlations as I was completely out of ideas on blog posting... )

Our "Correlation Economics" website has already amassed more than hundred correlations describing stock and bond valuations, gold, debt, deficits, the mortgage market, employment, GDP, etc...

In this article I'll go over the most prominent market moving correlations to give a thorough market outlook for the coming months. This way, investors know what to expect in the future. I'll also briefly touch my favourite correlations in the process.

Go here to see the analysis.