Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
Articles from Robert Hughes
Yesterday we noted the weaker reading from the Chicago Purchasing Managers’ Index data on manufacturing activity in the Chicago area. This tends to foreshadow the state of the national manufacturing sector. The Chicago report turned out to be a good predictor of the national manufacturing index released today by the Institute for Supply Management.
The ADP national payroll report for August suggests private payrolls in the U.S. added 177,000 new jobs. The 177,000 gain for August is less than what we saw in July, which was revised upward to an estimated 194,000. We pay attention to this report because it tends to suggest what we might see from the monthly jobs report from the Bureau of Labor Statistics.
Alcoa will report second quarter sales and profits after the close of U.S. trading today, marking the unofficial start of earnings season. Actually, 23 companies in the S&P 500 have already reported second-quarter results. When we blend those actual results with consensus expectations for those companies that have not yet reported, we find that topline sales growth is expected to fall by 0.7 percent versus a year ago.
Here at AIER, we use our data-driven Business-Cycle Conditions model as a barometer of the health of the economy, and the risk of recession. Last month, we saw quite a shift downward, as our index of leading indicators fell below the neutral level of 50 for the first time in 110 months. Today we are releasing this month’s results, and our model shows the Leaders index unchanged at 38.
According to data from FactSet, more than 80 percent of the companies in the S&P 500 have reported first quarter earnings through this morning. Overall, earnings reports have been better than expected, with almost 72 percent beating analyst expectations. Despite the beats, earnings growth overall remains negative, with reported earnings per share down about 7.8 percent from a year ago.
Here at AIER, we predict recessions based on our time-tested, data-dependent Business-Cycle Conditions model. Our April report, which we are releasing today, shows a decline to 38 in our index of Leaders, its first drop below the neutral 50 level in 110 months.
We should take notice. But why did it drop?
Alcoa’s earnings report is typically considered the unofficial start of earnings reporting season. The company is due to deliver results today after the U.S. equity market closes. However, according to data compiled by Factset, 22, or 4.4 percent, of the 505 companies that are currently part of the S&P 500 have already reported first quarter earnings.
The economic outlook is modestly upbeat, but rife with risks. As we approach the seventh anniversary of the end of the worst recession since the Great Depression, the economy has made substantial progress. There are reasons to believe that later this year businesses could feel more confidence in hiring and making other investments. But obstacles remain.