Perspectives Blog

What’s behind the weakness in U.S. housing?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | March 24, 2014

Existing U.S. home sales have been weak across all regions and this weakness pre-dates this year’s tough winter. Skyrocketing home prices, the surge in interest rates, and meager income growth have hit affordability and dented demand. Housing is no longer the accelerator for economic growth that it was earlier in the cycle. While the jury is out on just how much cold weather has impacted economic activity in recent months, we should keep in mi…

Predicting new drug sales is more art than science

Harlan Sonderling, CFA, Senior Healthcare Analyst | April 14, 2014

Predicting sales of new medicines is highly inaccurate and subject to significant and often costly errors. While investment analysts can draw on research tools and experience, history suggests new drug forecasting will remain more art than science. Despite the high level of uncertainty and variability in new drug forecasts, the innovative medicine industry is alive and well. Predicting sales of new medicines is highly inaccurate and subject to…

U.S. housing — A positive signal amidst the noise

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 29, 2014

…to smooth out the month-to-month wiggles. For instance, the best news of the week was the 18% gain in August new home sales to 504,000 (SAAR), the highest pace in six years. However, the Census Bureau has indicated a +/- 16% confidence interval on the monthly changes. So the data is very suspect, particularly with August housing starts down 13% and existing home sales down 2%. It is with this in mind that we need to assess trends through the lens…

Retail sector outlook – It’s a share game

Mari Shor, Senior Equity Analyst | March 17, 2014

…lying demand. To recap 2013, apparel retailers underperformed other sectors within consumer discretionary from a sales and stock perspective given payroll tax headwinds and lack of fashion newness. December and January sales were worse than expected for many companies due in part to disruptive winter storms, though management teams provided a more positive view of February given more favorable weather and higher tax refunds driving spending in th…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

…ers accustomed to low rates and shocked by a 24% spike in anticipated mortgage payments. This lack of first-time homebuyers is an important missing link now in the housing recovery. Exhibit 1 Source: Federal Reserve Bank Senior Loan Officer Opinion Survey Second, an important support for demand this cycle has been from investors. Attracted by distressed home prices and low financing costs, investors with deep pockets have provided an assist for…

Apparel retail doldrums

Mari Shor, Senior Equity Analyst | August 11, 2014

…spending on non-durables, including apparel (Exhibit 1). Relative strength in durable goods, including autos and home-related items, likely reflects post-recession catch-up spending and investment in home-related assets supported by strong housing fundamentals and government infrastructure spend. In addition, travel and leisure spending has been strong, as both older and younger generations express their preference for meaningful experiences over…

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

…e of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. (Remember home equity lines of credit?) Autos, home-related durables and maintenance spending are doing well but seemingly at the expense of other consumer expenditures like apparel and dining and some parts of consumer staples. Auto sales were strong last month, a 16.4 million annual selling rate, tracking above last year’s 15.5 million sales….