By: Scott Davis
Folks, in the link below please find our latest Melius Macro Views slide deck. Key takeaways below:
- 4Q18 earnings showed an industrial upcycle still on track with only ~5% of end-markets not participating (notably China auto, U.S. housing and global electronics) – 6% core growth in quarter and strong January encouraging
- Longer cycle order books continue to build (despite the fall in oil prices) and 2019 capex outlooks are coming in well ahead of sales guides
- Shorter cycle datapoints remain weaker – mainly driven by China and Europe is moderately weaker as well. China is biggest risk to global macro we think.
- Industrial sector is best performer in S&P to start year, and having best relative year since 2016…but valuations still well below historical upcycle levels
- Aerospace has led the industrial rally, not cyclicals…Machinery still pricing in a recession – we continue to favor capex impacted stocks