Brief USA: 2019 Semiconductors: 5%+ Decline and more

In this briefing:

1. 2019 Semiconductors: 5%+ Decline
2. Global Equity Strategy: Global Outlook Improving
3. A Simple Model that Could Take OECD US GDP Forecasts to Predict the US Dow Jones Index Level?
4. New US Sanctions Against Venezuela: Impact on the Oil Sector and Prices

1. 2019 Semiconductors: 5%+ Decline

An earlier post outlined the general direction of the Objective Analysis 2019 forecast but didn’t provide any numbers.  In this post I explain the 5%+ decrease in revenues that the market will experience and how and why various elements play into that number.

2. Global Equity Strategy: Global Outlook Improving

Broad global indexes (MSCI ACWI, ACWI ex-U.S., and EAFE) are showing signs of bottoming due to positive short-term price inflections topside their respective downtrends. Additionally, cyclical Sectors Technology, Consumer Discretionary, and Manufacturing exhibit early signs of price and RS bottoms throughout Europe, Japan, and EM.  In today’s report we highlight attractive and actionable opportunities within these cyclical Sectors, and provide a technical appraisal of major global indexes.

3. A Simple Model that Could Take OECD US GDP Forecasts to Predict the US Dow Jones Index Level?

Following on from last months publication that gave a brief introduction into the viability of constructing a model using machine learning techniques that can predict the direction of daily moves in the European high yield index using data from the previous trading day. 

In this months note, we have taken a step back and constructed a simple model using traditional statistical techniques that use GDP forecasts to predict moves in the Dow Jones ETF’s.

Over the coming months, we will endeavor to show how data science can be used as an integral part of the investment management process and highlight its advantage over basic statistical modeling techniques traditionally used in finance.

With further modeling and analysis to confirm this basic investigation, investors may be able to use this information in their asset allocation decisions and profit from equity market beta-selection.

4. New US Sanctions Against Venezuela: Impact on the Oil Sector and Prices

US sanctions against Venezuela’s central bank and PDVSA, announced on Monday (January 28), have sent refiners on the US Gulf Coast scrambling for replacement supplies of heavy crude. Though they do not cover the business of non-US entities with PDVSA, the move has put Venezuelan crude importers in China and India on notice.

For US refiners, the three main alternative suppliers of heavy, sour crude — Canada, Mexico and Saudi Arabia — are either constrained in their ability to step up supply or are deliberately reducing shipments.

Venezuela’s upstream oil sector has been limping for a long time now. But the sanctions against PDVSA may deal it a death blow. The crude market is keeping a wary eye on the situation but appears unwilling to price in the worst-case scenario for the time being, as it remains fixated on the global economic prospects and concerns over oil demand growth.

We look at the fallout of the latest move by Washington on the primary entities doing oil business with Venezuela: refiners in the US, China and India (the main markets for Venezuelan crude) and Russian giants Rosneft and Lukoil.

We also discuss the likelihood and impact of Venezuelan crude production grinding down from the current 1 million b/d to zero.