Strong earnings momentum and a turn in provisioning argue for revising up estimates, but faster than expected dollar appreciation argues against. An imminent increase in enterprise spending, positive guidance, and a turn in provisioning argue for overweighting the Financials, Industrials, Consumer Discretionary and Tech, which is how we are positioned. Negative guidance and a strengthening dollar argue for underweighting Energy and Materials, with underweights for Utilities and Telecom supported by negative guidance and poor earnings momentum, respectively. We see high cash and low macro growth expectations spurring M&A and reiterate our Acquisition Targets basket which has outperformed the S&P 500 by 6.7% so far year-to-date...Click on charts to enlarge, courtesy of Deutsche Bank.
Interestingly, the "mini-crisis" of early 1990-ties required longer duration of "charge-off rate" to hover at the same level as "QoQ Chg in Unemployment Rate"?
And who has tested the "loan loss provisions" in the case of prolonged unemployment around the current level?
Just climbing the wall of worry?
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