Peak Manufacturing?

Could Used Vehicle Inflation Increase Further?

Used car and truck CPI has been high for a while, but it’s about to face much tougher comps in the next few months which makes us think it will fall. Furthermore, you would think as public transportation usage increases once the country is fully vaccinated, demand for used vehicles will fall. However, the Blackrock used vehicle retention index implies used car and truck inflation is about to go vertical as the chart below shows. It will be interesting to see what happens to the Blackrock index this summer after the pandemic is over.

Investor Sentiment

Last week’s AAII investor survey reading showed the highest percentage of bulls since January 2018. Even though stocks didn’t fall, in the week of April 14th, the percentage of bulls fell 3.1% to 53.8% and the percentage of bears rose 4.2% to 24.2%. It’s ideal to see sentiment worsening in a rising stock market, although stocks can’t rise forever either way. The chart below shows a new twist on this index. The 5 year moving average of the bull-bear spread is at a new high by far. That’s pretty amazing because last year we had the longest streak ever where there were more bears than bulls. This chart looks a lot like the 10 year Shiller PE ratio. Both imply weak long-term forward returns.

Stocks Should Be High

Recently the highest percentage of S&P 500 stocks were above their 200 day moving average ever. However, that might be justified because earnings are so strong. The 1-month breadth of the earnings revision ratio is among the strongest since 1999. Usually, that doesn’t last. We aren’t about to see an earnings recession, but revision breadth can’t stay this strong just like how the PMI can’t stay this high.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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