By: Scott Davis
Folks, in the link below please find our latest Melius Macro Views slide deck. Key takeaways below:
- Industrials seem to be rolling from one end-market recession to another, led by shorter cycle markets, accentuated by inventory destocking. Longer cycle is healthier overall, though we are starting to see project delays (p. 5, 9).
- N. America has been our main global growth engine, but is now stalling with August data points showing continued deceleration (p. 6). China remains stable overall at low levels (p. 10), and Europe still weakening.
- Our inventory data remains at post-financial crisis highs (p. 11-15), at odds with destocking commentary on earnings calls. Trade distortions are making it more difficult to draw conclusions from the data.
- The industrial sector has given back all YTD outperformance and is now on track to underperform the S&P for a 3rd consecutive year; would be first time in at least 30 years (p. 35). Relative valuations are already pricing in a mild recession (p. 41). Funds continue to flow out of industrials and are closing in on prior trough levels (p. 31).