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Morning Notes — Bullish Narrative Test Next Week

Bullish Narrative Test Next Week

January 17, 2020

Pain: US equities continue to benefit from an unchallenged bullish narrative that includes a de-escalation in trade tensions, monetary accommodation (Fed still increasing its balance sheet), rising expectations for an earnings rebound and still-light positioning given large net outflows in 2019. Valuation concerns at almost 19x 2020 consensus EPS estimates provide the necessary ‘wall of worry.’

Ahead: Next week includes a few items that could challenge the bullish narrative. The ECB meeting next Thursday is the most important of several, while CQ4 earnings season picks up notably and Friday brings January Flash PMIs for Japan, Europe and the US.

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