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The Feds tinker with a taper February 5, 2014 Nick Raich, CFA CEO - PowerPoint PPT Presentation

Sep 01, 2023 •202 likes •537 views

The Feds tinker with a taper February 5, 2014 Nick Raich, CFA CEO nick.raich@earningsscout.com www.EarningsScout.com Twitter: @EarningsScout Change the way you view the market 2 www.EarningsScout.com Myth: Its just all about the Fed

  1. The Fed’s tinker with a taper February 5, 2014 Nick Raich, CFA CEO nick.raich@earningsscout.com www.EarningsScout.com Twitter: @EarningsScout

  2. Change the way you view the market 2 www.EarningsScout.com

  3. Myth: It’s just all about the Fed In, 2013, the S&P 500 was up more than 30% There is no doubt central bankers have supported equity prices2but it’s more than just all about the Fed! 3 www.EarningsScout.com

  4. Fact: It’s all about earnings expectations • 46 out of 131 industries in the S&P 500 had raised EPS expectations in 2013 ���������������� Source: The Earnings Scout 4 www.EarningsScout.com

  5. Fact: It’s all about earnings • 85 out of 131 industries in the S&P 500 had lowered EPS expectations in 2013 ������������������ Source: The Earnings Scout 5 www.EarningsScout.com

  6. Powerful liquidity injections by central bankers � 450 Initiatives � $16+ Trillion Prevented an � earnings cliff 6 www.EarningsScout.com

  7. Myth: Fed policy (i.e. QE) isn‘t working ������������ ������ 2013 ������� 2014 ������� 2015 ������� $102 is the all time record high 7 www.EarningsScout.com

  8. Fact: Earnings fell off a cliff in 2008 ��������������� ��������������� ������ ������ ������� 2009 8 www.EarningsScout.com

  9. Earnings fell off a cliff in 2008 Date 2009 Estimate 29 Aug '08 $ 106.08 30 Sep '08 $ 102.32 31 Oct '08 $ 90.33 28 Nov '08 $ 85.09 31 Dec '08 $ 78.72 Most traditional earnings 30 Jan '09 $ 68.59 models did not confirm a 27 Feb '09 $ 65.49 market rally until October 31 Mar '09 $ 63.04 2009 30 Apr '09 $ 60.58 29 May '09 $ 59.87 30 Jun '09 $ 59.68 31 Jul '09 $ 60.75 31 Aug '09 $ 60.41 30 Sep '09 $ 60.18 30 Oct '09 $ 61.76 9 www.EarningsScout.com

  10. Fact: Earnings fell off a cliff in 2008 �����'������������(���������� ������� ��!� � ����� � ��!" � ������� ��!� � ������ ��! � �'���������������) ������ ��!� � ���� � ��!� � ��"��� �� � ������ �� � ������ �� � ���#���$�� ���%�&�$�� ������$�� ���#���$�� ���%�&�$�� �������$�� ���#���$�� ��%�&�$�� �������$�� 10 www.EarningsScout.com

  11. Pioneers in earnings momentum 11 www.EarningsScout.com

  12. Change the way you view the market 13 www.EarningsScout.com

  13. Earnings fell off a cliff in 2008 Date 2009 Estimate 29 Aug '08 $ 106.08 30 Sep '08 $ 102.32 31 Oct '08 $ 90.33 28 Nov '08 $ 85.09 31 Dec '08 $ 78.72 Most traditional earnings 30 Jan '09 $ 68.59 models did not confirm a 27 Feb '09 $ 65.49 market rally until October 31 Mar '09 $ 63.04 2009 30 Apr '09 $ 60.58 29 May '09 $ 59.87 30 Jun '09 $ 59.68 31 Jul '09 $ 60.75 31 Aug '09 $ 60.41 30 Sep '09 $ 60.18 30 Oct '09 $ 61.76 14 www.EarningsScout.com

  14. Change the way you view the market Date 2009 Estimate Rate of Change 29 Aug '08 $ 106.08 D0.67% 30 Sep '08 $ 102.32 D3.54% 31 Oct '08 $ 90.33 D11.72% 28 Nov '08 $ 85.09 D5.81% 31 Dec '08 $ 78.72 D7.49% 30 Jan '09 $ 68.59 D12.86% 27 Feb '09 $ 65.49 D4.52% 31 Mar '09 $ 63.04 D3.74% 30 Apr '09 $ 60.58 D3.91% 29 May '09 $ 59.87 D1.17% 30 Jun '09 $ 59.68 D0.33% 31 Jul '09 $ 60.75 1.80% 31 Aug '09 $ 60.41 D0.56% 30 Sep '09 $ 60.18 D0.38% 30 Oct '09 $ 61.76 2.63% 15 www.EarningsScout.com

  15. Fact: Earnings fell off a cliff in 2008 +�������,-��(����� �����'������������(����������� ����� ��!� � ����� ��!" � *����� ��!� � *����� ��! � *����� ��!� � *����� ��!� � *����� �� � *������ �� � *������ �� � ���#���$�� ���%�&�$�� ������$�� ���#���$�� ���%�&�$�� �������$�� ���#���$�� ��%�&�$�� �������$�� 16 www.EarningsScout.com

  16. What drives asset prices? • Changes to macroeconomic expectations drives asset prices. • When expectations go up, risk on. • When expectations go down, risk off. • The best way to measure those changes is to look at �-�� ��������.-��(� to earnings estimate revisions (i.e. delta) 17 www.EarningsScout.com

  17. Pick one and why? In 2012, this country’s economy grew 7.8% In the same year, this country grew at 2.2% 18 www.EarningsScout.com

  18. It’s a game of expectations In 2012, China’s stock market was up less than 1% In 2012, the U.S. stock market was up 16% 19 www.EarningsScout.com

  19. Myth: Earnings estimates have to rise for higher stock prices ������������������������������������������������������� ������������������������������������������ /�����������0�11��������������(�������,23,����#�����&� ������������������������ 20 www.EarningsScout.com

  20. S&P 500 earnings estimates in 2013 ������� ������� ������ �������� �� ������� 2013 ������� ������� 2014 �� ��"� ������� 2015 ��"���� ������� $102 is the all time record high 21 www.EarningsScout.com

  21. Myth: Earnings have not mattered this year ���������������������������������������� ������ ���������������������������������������������� ������ � ��������������������!�����������������"�������� ���������������!�������������������������� ������������������������� �� ���������������0�11��������������(����4-����������.5����.���-�6������������� �������� ���.5�������6��-�(-��������/�(���� ����7����.��1�8���������.1� 22 www.EarningsScout.com

  22. Myth: Earnings have not mattered 23 www.EarningsScout.com

  23. Change the way you view the market 24 www.EarningsScout.com

  24. It’s all about the delta 25 www.EarningsScout.com

  25. When a don’t buy rating is a good thing 26 www.EarningsScout.com

  26. Rising interest rates: 10 Yr US Treasury After no taper rates have came back down. In anticipation of a Fed taper, longDterm interest rates rose sharply 27 www.EarningsScout.com

  27. Guidance in the 1 st half of 2Q 2013 earnings season Through the end of July, 3Q13 EPS guidance was negative but not as negative as it was in prior quarters. 28 www.EarningsScout.com

  28. The 2 nd half of 2Q 2013 earnings season was not kind The pace of downward 3Q 2013 earnings guidance worsened significantly in the 2 nd half of 2Q 2013 earnings season. 29 www.EarningsScout.com

  29. It’s all about the delta 30 www.EarningsScout.com

  30. /6���(������(�����.������.�����������������(�"<� ���� ������(�� �<� "<� �<�� <�� �<�� "<�� ;�<�" ����� *����� *����� *����� * ���� * ���� *����� *����� *"���� ; �<�"��������������.-��(�������-�� ����'������.�����������������(�"<� ��������1�� :��� ������#�����&���!�� ��" ����.�9�8-� ������(���.���

  31. Summary • It’s more than just all about the Fed • Focus on rates of change to earnings expectations • Understand why earnings estimates are changing • Fed wants to exit QE badly; not sure they will be able to without derailing the economic recovery • When will CEOs spend & hire? 33 www.EarningsScout.com

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