NEW YORK (Real Money) -- Only two full weeks into 2014 quarter, and we are already tracing out the themes of the year -- themes upon which large bets are being placed as if they are done deals. This kind of thinking isn't unusual at the beginning of the year. In fact, it is kind of endemic, as we're seeing what has resonance and what doesn't.
Without further ado, here's what I am seeing, with the positives first and the negatives second.
1. It's another year when aerospace is ascendant. We know from Alcoa (AA), which can produce up to 3 million fasteners per plane, or from General Electric (GE), with its giant share of jet engines, that the backlog of planes is huge. Still, the central thesis is that the customers are healthy. A number of folks believe the sector could be near a peak in the cycle, but they are being forced to rethink their negativity thanks to those customers, which range from newly well-capitalized American carriers to an exceptional crop of Middle East orders. We're set to hear from United Technologies (UTX) Wednesday, we'll find out more at that point.
2. Nonresidential construction may be, at last, increasing in the country. This gigantic generator of jobs has been stillborn since the Great Recession. It can be considered the lone area of the economy that's been holding the U.S. back. Nonresidential construction needs everything from big financing -- great for banks -- to robust white-collar companies that are running out of space, to a definitive end to the glut of office towers that had been built in response to the early-2000s boom. We are getting this theme from a host of banks that have reported. United Technologies has a gigantic heating, ventilation and air conditioning business, as well as its Otis elevator segment. So, again, this company will be able to tell us much more and cinch the theme for 2014.3. The end of the decline in personal computers. Lost in the shuffle of the widely perceived disappointment from Intel (INTC) was a reluctance to call the end of the personal-computer decline. But the business mix would put the lie to that pessimism, and it is entirely possible that the adoption of the current Windows iteration might be arresting the decline. It's interesting to see that Micron (MU) and Seagate (STX) actually advanced on Intel's report, and Western Digital (WDC) held in well. This is the thesis that is also buoying Hewlett-Packard (HPQ) and jibes with what a newly private, free-speaking Dell has been telling people behind the scenes. 4. More mergers and acquisitions than last year. Of course we now know that, other than a couple of very large deals -- noticeably in Berkshire Hathaway's (BRK.A) / (BRK.B) Heinz buyout and the Vodafone (VOD) - Verizon (VZ) Wireless deal -- that M&A was a bust last year. I know because I read The Street sister site The Deal every day, and it looked mighty thin. However, already we have a potential bidding war for Time Warner Cable TWC. We're also seeing a cross-border deal for Beam (BEAM), the maker of Jim Beam whiskey, in something that's reminiscent of when foreign companies wanted more exposure to a growing U.S. market. This theme is also one that would help Morgan Stanley (MS) and Goldman Sachs (GS), although only the latter firm seems to need it. 5. The troubles with the banks are now winding down, and being replaced by the rewarding focus on net interest margin. For two years during the mortgage boom, the bank stocks were duds. Analysts kept waiting for the far a rise in the more lucrative and less risky net interest margin, which is what banks make on your deposits. This was the quarter when it finally happened, and it is looking mighty joyous, particularly because of the rather remarkable increases in deposits. This, when added to a peak in prosecutions and mortgage putbacks, is a major reason why Bank of America (BAC) stock is showing such a peppy move -- one that I think is in its infancy. 6. The return of Europe to the fold of growth. So many companies that are based in the U.S. expanded rapidly across the pond during the period of European Union growth. The result was a huge drag on earnings during the European Great Recession, requiring dramatic cutbacks in labor forces. Now, as we are hearing from Alcoa, General Motors (GM), Ford (F) and General Electric, business has bottomed and is beginning to produce nascent year-over-year comparisons that could cause big earnings leverage. Just a little lift in sales after dramatic cutbacks in staff would produce that effect, and it is already being talked about as a chief reason to own the industrials during earnings season. 7. Spending for telco equipment, both domestic and in China, seems to be making a comeback. We have heard that in burgeoning orders for Ciena (CIEN) and F5 Networks (FFIV) , and we have seen it coveted in the activist grab on Juniper (JNPR), something I don't believe would be occurring if there hadn't been a change in the order rate. A merger between Sprint (S) and T-Mobile (TMUS) may be the only stumbling block to a floodgate of spending. Incidentally, following Sprint's deal with Softbank, the company has been spending that Japanese money like crazy in order to build out its national footprint, as CEO Dan Hesse had promised.
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