Follow me on Twitter: @johnblank100
Welcome to the week after Christmas. This is a challenging week to be an economics writer. There is little to the “in-basket” in terms of compelling macro indicators.
What’s the sole exception? A China manufacturing PMI hits Friday. If this PMI breaks 50 — foreshadowing expansion — it would shake consensus.
WTI oil dances around $37 a barrel at year-end. Oil’s trending price weakness keeps Algo share machines selling. The implication math-driven trading models operate on is when oil prices fall, global growth must be getting weaker.
Effect: Sell stocks.
During this week, many actual traders spend time with their family, ski, or just enjoy burning unused vacation days from 2015. Nodding to the spirit of a winter holiday, I see Vail Resorts (MTN) has held its Zacks Rank #1 (Strong Buy) since December 9th.
Zacks Editor Kevin Cook featured Colorado-based Vail Resorts as the Bull of the Day on December 22nd.
Outside of Salt Lake City, Utah, Vail bought Park City in Sep 2014 and took over the Canyons resort the year earlier. It then joined both via gondola to form the biggest ski resort in the U.S.
Goldman Sachs has a price target of $144 on this pricy $128 stock. The Zacks Growth score is B. The Momentum score is A. However, the Zacks Value score is F.
Outside the U.S., I see two large-cap stocks worth writing about. The reason? These two bull cases both say the global economy is in better shape than 2016 pessimists and oil markets think.
First, the Chinese are buying cell phones and wireless packages at a swift clip.
The lower oil prices go, the more miscellaneous monthly payments look more attractive to more people. In China, multiply that consumer spending growth idea by the tens of millions.
China Mobile (CHL) went back to a Zacks #1 Rank (Strong Buy) the day after Christmas. The stock also holds a long-term Zacks Growth score of B, a Value score of B, and a Momentum score of B. That package of scores makes this stock compelling on all fronts.
Second, there is upside downstream. Think of chemical companies. They use oil as a feedstock.
Such companies can lower prices and grow final demand for their petrochemical products, or keep product prices fixed and increase profit margins. Add currency weakness. You have a nice recipe for EPS growth.
Braskem (BAK) continues to hold its Zacks #1 Rank (Strong Buy). This Latin American chemical company also keeps a Zacks Growth score of A and a Value score of A.
This Brazilian large-cap stock has been on a tear the last few months. Managers briefly got tied to the Petrobras scandal, but then cut themselves free. It’s hard to call an end to the steep share price recovery. Yet $15 a share is a technical level that may be hard to surpass.
In sum, this may be a slow week trading stocks. That doesn’t mean the coming year will be as slow growing as vacationing traders think.
Want a bull case for this global economy?
The longer global macro growth data go sideways, the stronger the likelihood of a surprise to the upside. Demand builds incrementally. Demographic forces keep upsizing the world’s population. Policymakers step up with the juice.
Growth rates usually reach a tipping point — when the market has given up on the idea.
Here’s the Week Ahead for Global Macro Fundamentals—
On Monday, Brazil’s weekly survey of expectations comes out.
On Tuesday, Spain’s retail sales should be up +4.6% y/y, worse than a prior +5.8% y/y number, and likely lower due to lower gas prices.
Brazil’s FGV inflation rate should be 10.63%, about the same as the last reading.
Brazil’s net debt as a percentage of GDP is relatively low, at 34.2%. We will get a new reading here, too.
The S&P Case-Shiller Home Price Index for the U.S. should be up +5.55% y/y, about the same as the 5.45% y/y rate last time.
U.S. consumer confidence should be up to 93.8 from 90.4.
On Wednesday, the Nationwide House Price Index for the U.K. should be up +3.8% y/y, about the same as the prior 3.7% y/y rate.
Spain’s flash HICP consumer inflation rate should be up +0.1% y/y, a turnaround from a -0.4% y/y number prior.
U.S. pending home sales should be up +0.7% m/m, a better print than the prior +0.2% y/y reading.
On Thursday, Israel’s second estimate for GDP comes out. It should be the same +2.5% y/y number.
U.S. initial claims should be strong again, at 270K.
The Chicago PMI should be up 50.4, better than a prior 48.7.
On Friday, the Mainland China PMI for manufacturing hits. Look for a 49.8 reading, up from 49.6 last month.
The Irish unemployment rate should be 8.9%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment