By Michael McKeown, CFA, CPA - Chief Investment Officer
Let’s dive into some important charts.
Leading up to the past two recessions, people dramatically stopped looking for houses. It began slowing down two years before, as people worry about making a big purchase on credit. That is not the case today. Consumers are looking for houses. The National Association of Home Builders shows sales and foot traffic increasing steadily for four straight years.
There is a ton of noise in investor surveys and not clear signals. At extremes though, the data gets more interesting. Only in 2008-09, 2011, and briefly in 2015 have bearish advisors outnumbered bullish advisors. This is typically a contrarian signal, as when too many people get bearish, there is not anyone left to sell and push prices lower. Stock prices today are near the same level as the lows of August 2015 when bears outnumbered bulls, but it is important nonetheless for those with bullish outlooks.
It is a bloodbath in the energy sector. Total asset writedowns for oil and gas companies hit a quarterly record. The corporate bond market is telling us that energy today is as bad as the telecom bust in 2001 and the financial sector meltdown in 2008. Will it feed into other sectors that require credit? That is the bigger question now.
Both large and small banks tightened credit standards for commercial and industrial loans during the last two quarters of 2015. This was the first consecutive drop during this economic expansion. Demand for loans also fell in the last Federal Reserve survey of Senior Loan Officers. This is certainly partly related to the energy fall, but could feed into other areas. Tighter credit standards and a drop in demand for funds preceded the last two recessions.
Stay tuned for more charts as we follow the evolving economy and markets.
This material is based on public information as of the specified date, and may be stale thereafter. Aurum Wealth Management Group and/or Aurum Advisory Services has no obligation to provide updated information on the securities or information mentioned herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates.