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Strategist’s Handbook
Yardeni Research, Inc.
February 27, 2018
Dr. Edward Yardeni516-972-7683
Please visit our sites atwww.yardeni.comblog.yardeni.com
thinking outside the box
Table Of Contents Table Of ContentsTable Of Contents
February 27, 2018 / Strategist’s Handbook www.yardeni.com
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FiguresLeading Indicators 1S&P 500 Revenues & Earnings 2-3Valuation & Blue Angels 4Emerging Markets MSCI 5Equity Flows 6S&P 500: Sector Performance 7S&P 500 Sectors Forward Earnings 8S&P 500 Sectors Forward Profit Margins 9S&P 500 Sector Valuations 10US Economic Indicators 11Global Economic Indicators 12European Indicators 13QE: Stocks & Bonds 14
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 1920
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3000
2/27
12/31
YRI FUNDAMENTAL STOCK MARKET INDICATOR and S&P 500 INDEX
S&P 500 Index
YRI Fundamental StockMarket Indicator*
* Average of Consumer Comfort Index and Boom-Bust Barometer, which is CRB raw industrials spot price index divided by initial unemployment claims,four-week moving average.Source: Bloomberg, Commodity Research Bureau, Department of Labor, and Standard & Poor’s Corporation.
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Figure 1.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201480
100
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160
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150
12/27
YRI FUNDAMENTAL STOCK MARKET INDICATOR & ECRI WEEKLY LEADING INDEX
YRI Fundamental StockMarket Indicator*
ECRI Weekly Leading Index(1992=100)
* Average of Consumer Comfort Index and Boom-Bust Barometer, which is CRB raw industrials spot price index divided by initial unemployment claims,4-week moving average.Source: Bloomberg, Commodity Research Bureau, Department of Labor, and Economic Cycle Research Institute (ECRI).
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Figure 2.
Leading Indicators
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Figure 3.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019900
1000
1100
1200
1300
1400
900
1000
1100
1200
1300
1400
18
19 2/15
17
S&P 500 REVENUES PER SHARE(consensus analysts estimates in dollars, weekly, ratio scale)
Consensus ForecastsAnnual RevenuesForward Revenues*
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201950
75
100
125
150
175
200
50
75
100
125
150
175
200
2/2217 18
19
S&P 500 OPERATING EARNINGS PER SHARE(consensus analysts estimates in dollars, weekly, ratio scale)
Consensus ForecastsAnnual EarningsForward Earnings*
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20196
7
8
9
10
11
12
13
6
7
8
9
10
11
12
13
1819 2/1517
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S&P 500 PROFIT MARGIN(using analysts average earnings and sales forecasts, percent)
Consensus Forecasts
Forward Margins* (11.9)Annual Margins
* Time-weighted average of the consensus estimates for current and next year. Source: Thomson Reuters I/B/E/S and Standard & Poor’s.
S&P 500 Revenues & Earnings
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94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20-25
-20
-15
-10
-5
0
5
10
15
20
25
-25
-20
-15
-10
-5
0
5
10
15
20
25
Dec
S&P 500 AGGREGATE REVENUES & US BUSINESS SALES OF GOODS(yearly percent change)
S&P 500 Aggregate Revenues* (8.5)Business Sales of Goods** (6.7)
** Manufacturing and trade sales.* Revenues are derived by multiplying S&P 500 revenues per share by the S&P 500 divisor for each quarter.
Source: Census Bureau and Standard & Poor’s.
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Figure 4.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201910
35
60
85
110
135
160
185
10
35
60
85
110
135
160
185
2/22S&P 500/400/600 FORWARD EARNINGS(dollars per share, ratio scale)
Forward Earnings*S&P 500 LargeCap (160.35)S&P 400 MidCap (112.15)S&P 600 SmallCap (51.64)
* Time-weighted average of consensus estimates for current year and next year.Source: Thomson Reuters I/B/E/S.
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Figure 5.
S&P 500 Revenues & Earnings
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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20198
10
12
14
16
18
20
22
24
26
28
8
10
12
14
16
18
20
22
24
26
28
2/26
FORWARD P/E RATIOS FOR S&P STOCK PRICE INDEXES*(daily)
S&P 500 LargeCap (17.3)S&P 400 MidCap (17.1)S&P 600 SmallCap (18.5)
* Daily stock price index divided by 52-week forward consensus expected operating earnings per share.Source: Thomson Reuters I/B/E/S and Standard & Poor’s.
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Figure 6.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
600
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2000
2200
2400
2600
2800
3000
3200
3400
x10
x11
x12
x13
x14
x15
x16
x17
x18
x19
S&P 500, FORWARD EARNINGS, and VALUATION(weekly)
Actual 02/26/18Implied* 02/22/18
* Implied price index calculated using forward earnings times forward P/Es. Weekly data start January 2007.
Blue Angels: S&P 500
Source: Standard & Poor’s and Thomson Reuters I/B/E/S.
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Figure 7.
Valuation & Blue Angels
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95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 200
500
1000
1500
200
300
400
500
600
700
2/26
2/26
EMERGING MARKETS MSCI STOCK PRICE INDEX (in dollars)& INDUSTRIALS COMMODITY PRICE INDEX(daily)
Emerging MarketsMSCI Stock Price Index(in dollars)
CRB Raw IndustrialsSpot Price Index*
* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.Source: MSCI and Commodity Research Bureau.
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Figure 8.
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20200
300
400
500
600
700
10
15
20
25
30
35
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50
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85
90
95
100
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110
115
2/15
2/26
EMERGING MARKETS MSCI FORWARD EARNINGS PER SHARE& CRB RAW INDUSTRIALS SPOT PRICE INDEX
Emerging MarketsForward Earnings*
CRB Raw IndustrialsSpot Price Index
* Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter.Source: Thomson Reuters I/B/E/S and Commodity Research Bureau.
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Figure 9.
Emerging Markets MSCI
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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
0
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
Q4
Q3
Jan
Q4
Q3
S&P 500 DIVIDENDS & BUYBACKS(billion dollars, annualized)
Buybacks
Dividends
S&P 500 Index
Source: Standard & Poor’s.
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i.com
Figure 10.
***** Chart Not Available *****
Task: ICIEQETF12
Invalid calculation element [ICKS]
02-27-2018 - 15:02:25
Figure 11.
Equity Flows
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Figure 12.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
50
100
150
200
250
300264.8%CONSUMER DISCRETIONARY
(performance relative to S&P 500)
Data thru 02/26/18
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
20
40
60
80
100
86.5%INDUSTRIALS
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-140
-120
-100
-80
-60
-40
-20
0
20
-129.3%
CONSUMER STAPLES
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-20020406080100120140160180200194.5%INFORMATION TECHNOLOGY
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-250
-200
-150
-100
-50
0
50
-247.2%
ENERGY
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-75
-50
-25
0
25
50
-56.7%
MATERIALS
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
25
50
75
100
125
150
175 173.7%FINANCIALS
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-300
-250
-200
-150
-100
-50
0
50
-231.4%
TELECOMMUNICATION SERVICES
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-60
-45
-30
-15
0
15
30
45
-16.8%
Note: Indexed to 0 on 3/9/2009.Source: Standard & Poor’s Corporation.
HEALTH CARE
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-250
-200
-150
-100
-50
0
50
-188.1%
UTILITIES
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S&P 500: Sector Performance
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Figure 13.
06 07 08 09 10 11 12 13 14 15 16 17 18 195
17
29
4153
17 18 19 2/15CONSUMER DISCRETIONARY
06 07 08 09 10 11 12 13 14 15 16 17 18 1913
19
25
31
3743
17 1819 2/15INDUSTRIALS
06 07 08 09 10 11 12 13 14 15 16 17 18 1913
19
25
31
37
17 18 19 2/15CONSUMER STAPLES
06 07 08 09 10 11 12 13 14 15 16 17 18 1915
30
45
60
75
17 1819 2/15INFORMATION TECHNOLOGY
06 07 08 09 10 11 12 13 14 15 16 17 18 198
28
48
6888
108
1718 19 2/15
ENERGY
06 07 08 09 10 11 12 13 14 15 16 17 18 196
11
16
21
2617
1819 2/15MATERIALS
06 07 08 09 10 11 12 13 14 15 16 17 18 198
20
32
4456
1819 2/15
17
FINANCIALS
Includes Real Estatethrough September 2016
06 07 08 09 10 11 12 13 14 15 16 17 18 197
9
11
13
15
17
17 1819
2/15TELECOMMUNICATIONS SERVICES
06 07 08 09 10 11 12 13 14 15 16 17 18 1920
35
50
65
80
17 18 19 2/15HEALTH CARE
* Time-weighted average (in blue) of consensus operating earnings estimates for current and next year (in red). Source: Thomson Reuters I/B/E/S.
06 07 08 09 10 11 12 13 14 15 16 17 18 1911
12
13
14
15
161718
1718
192/15
UTILITIES
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S&P 500 Sectors Forward Earnings
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Figure 14.
06 07 08 09 10 11 12 13 14 15 16 17 18 191
3
5
7
9
11
1718 19 2/15
CONSUMER DISCRETIONARY
(8.0)
06 07 08 09 10 11 12 13 14 15 16 17 18 196
8
10
12
1718 19 2/15
INDUSTRIALS
(10.0)
06 07 08 09 10 11 12 13 14 15 16 17 18 195.5
6.0
6.5
7.0
7.517 18 19 2/15
CONSUMER STAPLES
(7.1)
06 07 08 09 10 11 12 13 14 15 16 17 18 1910
15
20
25
17 18 192/15
INFORMATION TECHNOLOGY
(22.2)
06 07 08 09 10 11 12 13 14 15 16 17 18 190
3
6
9
12
15
17 18 19 2/15
ENERGY
(6.2)
06 07 08 09 10 11 12 13 14 15 16 17 18 194
6
8
10
12
14
1718
19 2/15
MATERIALS
(11.2)
06 07 08 09 10 11 12 13 14 15 16 17 18 194
8
12
16
20
24
18 19 2/1517
FINANCIALS
(18.5)
Includes Real Estatethrough September 2016
06 07 08 09 10 11 12 13 14 15 16 17 18 196
8
10
12
14
1718 19
2/15TELECOMMUNICATION SERVICES
(13.2)
06 07 08 09 10 11 12 13 14 15 16 17 18 199.5
10.0
10.5
11.0
11.5
12.0
17 18 19 2/15
HEALTH CARE
(11.1)
* Time-weighted average of the consensus estimates for current and next year. Source: Thomson Reuters I/B/E/S.
06 07 08 09 10 11 12 13 14 15 16 17 18 198
9
10
11
12
13
17
18
19 2/15
UTILITIES
(11.8)yardeni.com
S&P 500 Sectors Forward Profit Margins
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Figure 15.
06 07 08 09 10 11 12 13 14 15 16 17 18 19.5
1.0
1.5
2.0
2.5
2/15
CONSUMER DISCRETIONARY
(1.19)
06 07 08 09 10 11 12 13 14 15 16 17 18 19.6
.8
1.0
1.2
1.4
2/15
(relative forward P/Es by sector*)
(1.03)
INDUSTRIALS
06 07 08 09 10 11 12 13 14 15 16 17 18 19.8
1.0
1.2
1.4
1.6
2/15
(1.06)
CONSUMER STAPLES
06 07 08 09 10 11 12 13 14 15 16 17 18 19.8
1.0
1.2
1.4
1.6
2/15
(1.07)
INFORMATION TECHNOLOGY
06 07 08 09 10 11 12 13 14 15 16 17 18 19.5
1.0
1.5
2.0
2.5
3.0
3.5
2/15
(1.14)
ENERGY
06 07 08 09 10 11 12 13 14 15 16 17 18 19.75
1.00
1.25
1.50
1.75
2/15
(1.00)
MATERIALS
06 07 08 09 10 11 12 13 14 15 16 17 18 19.6
.8
1.0
1.2
1.4
2/15
(0.80)
FINANCIALS
Includes Real Estatethrough September 2016
06 07 08 09 10 11 12 13 14 15 16 17 18 19.50
.75
1.00
1.25
1.50
1.75
2/15(0.63)
TELECOMMUNICATION SERVICES
06 07 08 09 10 11 12 13 14 15 16 17 18 19.6
.8
1.0
1.2
1.4
2/15
(0.92)
HEALTH CARE
* Sector’s forward P/E divided by S&P 500 forward P/E. Source: Thomson Reuters I/B/E/S.
06 07 08 09 10 11 12 13 14 15 16 17 18 19.6
.8
1.0
1.2
1.4
2/15
yardeni.com(0.92)
UTILITIES
S&P 500 Sector Valuations
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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
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-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
22MEDIAN SALES PRICE OF EXISTING SINGLE-FAMILY HOMES(yearly percent change)
Source: National Association of Realtors.
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Figure 16.
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 173.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
13.5
14.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Jul
12/29
CRUDE OIL OUTPUT: UNITED STATES & CANADA(million barrels per day, nsa)
US (9.1)
US + Canada (12.6)
US (10.3)(weekly)
Source: Oil Market Intelligence and Energy Information Administration.
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Figure 17.
US Economic Indicators
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20195
6
7
8
9
10
11
12
5
6
7
8
9
10
11
12
2/15
MSCI FORWARD PROFIT MARGINS: WORLD(using analysts’ average earnings and revenues forecasts)
Forward profit margin*
All Country World (9.5)EMU (7.6)Emerging Markets (7.3)
US (11.7)
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* Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter.Source: Thomson Reuters I/B/E/S.
Figure 18.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
Industrial Production (Dec=6.2)Consumer Price Index (Jan=1.5)Producer Price Index (Jan=4.3)
CHINA: INDUSTRIAL PRODUCTION, ELECTRICITY OUTPUT, & INFLATION(yearly percent change)
Electricity Output (12-ma) (Dec=6.5)
Source: Haver Analytics.
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Figure 19.
Global Economic Indicators
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2013 2014 2015 2016 2017 201840
45
50
55
60
65
40
45
50
55
60
65
Jan
EUROPEAN PURCHASING MANAGERS INDEXES: MANUFACTURING*
Germany (61.1)France (58.4)Italy (59.0)Spain (55.2)UK (55.3)
Source: Haver Analytics.
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* An index above 50 indicates an increase in activity. An index below 50 indicates a decrease in activity.
Figure 20.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201860
70
80
90
100
110
120
60
70
80
90
100
110
120EUROZONE: INDUSTRIAL PRODUCTIONEXCLUDING CONSTRUCTION
Germany (Dec=118.3)France (Dec=94.9)Italy (Dec=87.7)Spain (Dec=83.4)
Eurozone (Dec=105.4)
Source: Haver Analytics.
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Figure 21.
European Indicators
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2008 2009 2010 2011 2012 2013 2014 2015.4
.6
.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
600
800
1000
1200
1400
1600
1800
2000
2200
QE1 QE2 QE3
S&P 500 INDEX
S&P 500 Index
US Treasuries+ Agency Debt+ MBS(trillion dollars)
Note: QE1 (11/25/08) = Fed starts buying $1.24tn in mortgage securities. QE1 expanded (3/16/2009) = Fed starts buying $300bn in Treasuries.QE2 (11/3/10) = Fed starts buying $600bn in Treasuries. QE3 (9/13/12) = Fed starts buying $40bn/month in mortgage securities (open ended).QE3 expanded (12/12/12) = Fed starts buying $45bn/month in TreasuriesSource: Standard & Poor’s.
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Figure 22.
2008 2009 2010 2011 2012 2013 2014 2015-2
0
2
4
6
-2
0
2
4
6
QE1 QE2 QE3
10-YEAR BOND & TIPS YIELDS
Source: Board of Governors of the Federal Reserve System.
10-Year TIPS Yield (0.8)
10-Year Bond Yield (2.9)
Note: QE1 (announced 11/25/08) = Fed buys $1.24tn in mortgage securities. QE2 (announced 11/3/10) = Fed buys $600bn in Treasuries. QE3(announced 9/13/12) = Fed buys $40bn/month in mortgage securities (to infinity and beyond). QE3 extended (announced 12/12/12) = Fed buys$45bn/month in Treasuries.Source: Board of Governors of the Federal Reserve System.
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Figure 23.
QE: Stocks & Bonds
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