20180111-穆迪服务-Stocks_and_Spreads_May_Transcend_Higher_Treasury_Yields_27页_809kb

Moody's Analytics Weekly Market Outlook Summary

Core Content

Moody's Analytics Weekly Market Outlook discusses the potential impact of rising Treasury yields on stock markets and credit spreads, drawing comparisons with historical events to assess market resilience.

Main Points

1. Treasury Yields and Market Response

• Treasury Yields: The 10-year U.S. Treasury yield has risen from 2.41% at year-end 2017 to 2.55%, approaching the 2.6% average predicted for Q1 2018.
• Historical Comparison: During the taper tantrum in 2013-2014, Treasury yields reached nearly 3%, yet equity prices still rose by 24.7% year-over-year. This suggests that equity markets can withstand higher yields if profit and credit fundamentals remain stable.
• Risk of Equity Price Drop: Current equity valuations (16.0x earnings) are higher than during the taper tantrum, increasing vulnerability to interest rate hikes. However, a sell-off may be mild if fundamentals are not adversely affected.

2. Credit Market Outlook

• Investment Grade Spreads: Expected to exceed 100 bp by year-end 2018, reflecting increased risk premiums.
• High Yield Spreads: Projected to rise to around 400 bp by year-end 2018, up from a recent 325 bp.
• Default Rates: The U.S. HY default rate is forecast to average 2.4% in Q3 2018, down from 3.4% in November 2017, indicating improved credit quality.
• Historical Defaults: In 2015-2016, the HY spread ballooned from 451 bp to 836 bp, marking a more severe sell-off driven by earnings and credit concerns compared to the milder 1994 correction.

3. Business Activity and Capital Spending

• Core Business Revenues: Q4 2017 is expected to show the fastest year-over-year growth since Q3 2014, at 5.5%, driven by improved business conditions.
• Capital Expenditures: A strong correlation (0.90) exists between the growth of new orders for nondefense capital goods and core business revenues, supporting the case for increased capital spending in 2018.
• Small Business Sales: Improved sales volume reported by small businesses, with a net increase of +9.0 percentage points, but still below historical peaks.

4. Downside Risks to Business Outlook

• Payroll Growth: December's new payroll jobs were below expectations at 148,000.
• Unemployment Claims: A 6.8% rise in initial state unemployment claims indicates ongoing labor market challenges.
• Job Openings: November 2017 saw the fewest job openings since May 2017, suggesting a potential slowdown in hiring activity.

5. Regional Market Focus

U.S.

• Focus Areas: Housing and manufacturing data will be key in the coming week.
• Key Indicators:
  • NY Empire State Manufacturing Survey (Jan)
  • NAHB Housing Market Index (Jan)
  • Jobless Claims (Jan 13)
  • Philadelphia Fed Survey (Jan)
  • Industrial Production (Dec)
  • Capacity Utilization (Dec)
  • New Residential Construction (Dec)
  • Permits (Dec)
  • Michigan Sentiment (Jan)

Europe

• Inflation Trends: Eurozone annual harmonized inflation is expected to remain at 1.4% in December, below the ECB's target of ~2%.
• Core Inflation: Stagnant, with no significant increase.
• Political Uncertainty: Italian elections and German coalition talks could affect the European reform agenda.
• Key Indicators:
  • Euro Zone External Trade (Nov)
  • Germany CPI (Dec)
  • Italy CPI (Dec)
  • U.K. CPI (Dec)
  • Euro Zone CPI (Dec)
  • Russia Foreign Trade (Dec)
  • Spain Foreign Trade (Nov)

Asia-Pacific

• China GDP: Q4 2017 GDP growth is expected to remain at 6.8%, unchanged from Q3.
• Industrial Output: Manufacturing output is likely to continue its strength, but heavy industry remains a drag.
• Fixed Asset Investment: Stable at 7.1% in December, but may slow due to weak export demand.
• India Inflation: Wholesale price inflation is expected to rise to 4.1% in December, driven by food prices and commodity rebounds.
• Australia Unemployment: Likely to remain at 5.4% in December, with continued labor market tightness.
• Key Indicators:
  • India Foreign Trade (Dec)
  • Indonesia Foreign Trade (Dec)
  • Japan Industry Activity (Nov)
  • India Wholesale Price Index (Dec)
  • Japan Machinery Orders (Nov)
  • Australia Unemployment (Dec)
  • China Fixed Asset Investment (Dec)
  • Singapore Foreign Trade (Dec)

Key Information

• The market may absorb higher Treasury yields without significant collapse in equity prices, provided profit and credit fundamentals remain intact.
• Equity valuations are currently more stretched than in 2014, but less so than in 2000, suggesting a more moderate market reaction to rate hikes.
• Credit spreads are expected to widen if Treasury yields continue to rise, potentially reversing the upward trend in yields.
• Business activity has shown improvement, with core revenues growing at a faster pace in 2017.
• The U.S. labor market shows mixed signals, with slower-than-expected job growth and rising unemployment claims.
• Inflation remains subdued in the Eurozone, with the ECB likely to maintain quantitative easing for the foreseeable future.
• China's economy is expected to grow at 6.8% in Q4 2017, with continued investment in fixed assets, though manufacturing investment may slow.
• Political instability in Europe and uncertainty around Brexit could affect market sentiment and economic performance.