By: Scott Davis 

Folks, in the link below please find our latest Melius Macro Views slide deck. Key takeaways below:

  • 4Q19 will mark the 4th consecutive quarter of a short cycle recession in industrials, with a likely 5th earnings cut vs. historical 4-6 quarter average. We expect cautious guidance from the corporates for 2020 but….our data points suggest we remain on track for mid-2020 bottom.
  • Channel inventories remain elevated and will take 1-2 more quarters to normalize given slower demand. OEM inventories skewed by 737 MAX grounding.
  • Credit data flashing warning signs? C&I loans flatlining and demand has deteriorated. Elevated debt levels remain a cycle concern.
  • Consensus forward estimates have come down meaningfully for deeper cyclicals and sell-side sentiment remains negative, with buy ratings near cycle lows.
  • Industrial stocks having decent start to year, but relative valuations remain at depressed levels. Investor interest appears to be returning judging by fund inflows.

Report Here