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Comunidade de Traders / Re: Mercado em TEMPO REAL - Notícias, rumores, análises, chat.
« em: 2014-02-20 17:53:28 »
Citigroup 14/02
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Economic Outlook
Surviving “Hiber-Nation”
The persistent pattern of winter storms and cold temperatures appears to be taking a greater toll on business and consumer activity than anticipated, prompting Citi economists to lower their Q1 GDP estimate from a 11⁄2%-2% range to 1%. The effects are showing up in extremely rare declines in usually stable core retailing. A sharp drop in factory output also suggests weather disruptions are interacting with existing plans to trim inventory, especially in the auto sector.
Citi economists expect a sharp snapback in activity but with the latest sweep of storms in mid- February, the rebound may not be visible until Q2. On four previous occasions when core retail sales fell in this recovery, spending rebounded an average of one full percentage point. Despite the softening, financial conditions remain very supportive and both NFIB firms and consumer expectations are resilient. Small firms’ hiring plans rose to an expansion high in January.
Fed Chair Yellen remained optimistic on the outlook despite the softer data and recent market turmoil. Absent signs later this spring that winter weakness is more fundamental than transitory, the Fed is unlikely to alter tapering plans or forward guidance.
Equities
Citi Analysts Remain Buyers of Weakness
In Citi’s view, corporate profitability is perceived to be at record levels even as eight of the 10 S&P 500 sectors are generating EBIT margins below their 2007 highs and investors do not fully comprehend the impact of lower effective tax rates on EPS. While top-line growth is likely to be achieved in 2014, which then can drive operating leverage, some of the earnings benefit will be chipped away by probable tax rate increases. Thus, EPS is only expected to rise by less than 7% this year and consensus estimates are easing back already to reflect guidance changes.
More critically, quarterly earnings and market performance are highly correlated and equities are unlikely to experience another valuation bubble as was the case in the late 1990s. Additionally, margin collapses are associated with weaker credit conditions and the opposite is in place currently, suggesting that peak profitability arguments appear quite premature. Besides, Citi lead indicator on volatility suggests that we are not out of the woods just yet and the G10 Citi Economic Surprise Index may weigh on investor enthusiasm.
Citi analysts still believe that the market may face some additional bumpiness and that all of the complacent mindset has been washed away, but they also think that markets are unlikely to give way to a 10%+ correction. Exogenous shocks cannot be ruled out but the endogenous backdrop continues to look promising. Thus, Citi remains buyers of weakness but would not chase strength.
End-2014 S&P500 Index Target:1975
