| | | Here are some chart from B of A Merrill Lynch .... the second chart shows the market valuations of the various major markets in the world. .... the US is certainly got the highest valuations.
Equity Markets1. European elections and trade wars are less of a “tail risk” according to the latest Merrill Lynch survey of investors. On the other hand, a potential correction in the global bond markets, a delay in corporate tax cuts, or the Fed’s early start on balance sheet reduction now pose more of a concern.
Source: BofAML, @joshdigga
Higher rates (as well as weaker earnings) are expected to end the 8-year bull market.
Source: BofAML, @joshdigga
2. Based on the same survey, how do US stock valuations compare to those in other regions?
Source: BofAML, @joshdigga
3. According to the next chart, the markets seem to be giving up on US corporate tax cuts. It shows that a broad basket of companies paying the highest tax rates has reversed all of its post-election outperformance and then some. The stock market doesn’t see these firms in a lower-tax regime anytime soon.
Source: @tracyalloway
4. With the ACA remaining in place (for now), healthcare stocks have outperformed.
5. This chart shows the drawdowns for stocks vs. bonds. It’s not clear if many market participants fully appreciate the difference in the risk profiles.
Source: Pimco, @joshdigga
6. US M&A activity has slowed in February. Are higher rates to blame?
Source: @fastFT; Read full article
Also, LBO leverage has been a bit lower this year.
Source: @TRLPC
Back to Index
Credit1. As discussed yesterday, US auto sales have probably peaked.
Source: Moody’s Investors Service
Part of the reason we should expect vehicle sales to slow is the growing risk in the auto finance sector. Average loan terms have lengthened significantly (chart below), and debt growth has outpaced household incomes (second chart below).
Source: Moody’s Investors Service
Source: Moody’s Investors Service
2. High-yield credit spreads have widened over the past few days on softer equity markets and the weakness in oil. Will we see buyers stepping in at these levels as the search for yield continues? Here is the HY CDX spread (a standardized “index” of HY CDS).
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