Epsilon Theory Professional

In The Flow

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In the Flow – You Are Here, May 2019

May 13, 2019

Each month we update our five narrative Monitors and summarize the main findings from each.

The big reveal for May? There’s a tremendous amount of narrative complacency out there, particularly on Trade and Tariffs, which means this market has a long way down if the narrative focuses on negotiation failure. It’s not focusing there yet, but that’s what you want to watch for.

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In the Flow – Wage Growth, Groucho Marx Edition

May 6, 2019

Wage stagnation in 2016 was actually much worse than you were told. Did this make a difference in the Midwestern states that swung the election, in that actual labor conditions were worse than everyone thought they were? I think yes.

Wage growth in 2018 was actually much better than you were told. Did this make a difference in the current Fed/Wall Street/White House narrative that inflation is dead and the easy money punchbowl can be maintained without consequence? I think yes.

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In the Flow – It’s Toasted

April 30, 2019

When Donald Trump tells you that there’s no inflation, that up is down and black is white, that monetary policy … It’s toasted! … you’ve gotta believe him, right? Right?

Actually, for investment purposes, you do. When everyone knows that everyone knows that inflation is dead, that IS the common knowledge. And the common knowledge must be respected.

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Narrative Monitors

ET Pro Inflation Monitor

Weimar

We track the prevalence and attention of inflation topics in financial and broadly circulated news sources, including their attachment to narratives around financial markets.

Updated through April 30, 2019. Updated monthly.

ET Central Bank Omnipotence Monitor

Central Bank Omnipotence

We track the prevalence and attention of credibility attached by a wide variety of news sources to central banks and their influence on participants in financial markets.

Updated through April 30, 2019. Updated monthly.

ET Trade and Tariffs Monitor

Trade

We track the attention paid to and sentiment of a various trade and tariff-related topics in a range of news sources, especially with respect to their attachment to financial market narratives.

Updated through April 30, 2019. Updated monthly.

ET US Fiscal Policy Monitor

Fiscal Policy

We track the strength and consistency of narratives about US fiscal policy, including budgets, tax policy and debt.

Updated through April 30, 2019. Updated monthly.

ET Credit Cycle Monitor

Knights Templar Bank

We track the strength of narratives about the credit cycle in general, plus lending, liquidity and other trends in credit markets.

Updated through April 30, 2019. Updated monthly.

In Focus

ET In Focus reports are single-issue topical analyses. They cover investment and portfolio construction topics, issues relating to the businesses of investment management and wealth management, and narrow analyses of the narrative structure and trends on specific issues, companies, sectors, countries or financial markets.

Twilight of the (Consumer) Goods?

December 20, 2018

With increasing attention to trade and tariff narratives and falling attention to inflation and growth narratives in the U.S., we believe that investors may benefit from focus on sectors on which the latter narratives have weighed heavily in 2018. Of particular interest? Brand-oriented consumer stocks, especially many staples that have been left for dead.

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In Focus: Tesla (12/2018)

December 13, 2018

With some breathing room following an eventful earnings call, we re-examine the narrative around Tesla, and consider whether it has successfully navigated out of its high attention, negative sentiment trough.

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