July 19, 2021 – July 23, 2021
Market Performance For The Week
Source: YCharts
Disclaimer: Past performance is no guarantee of future performance
The Good News
Another week of strong earnings.
$SPX is reporting its 2nd highest net profit margin (12.4%) since FactSet began tracking this metric in 2008. https://t.co/ZRARevYebW pic.twitter.com/IqOdbnHvcu
— FactSet (@FactSet) July 26, 2021
Long Term EPS estimates are historically very high.
Long-term EPS forecasts at multi-decade highs @SoberLook @ISABELNET_SA @BofAML pic.twitter.com/G8LUxtjeFm
— Rob Hager (@Rob_Hager) July 21, 2021
The Bad News
But Q2 is expected to be peak earnings growth.
Source: Charles Schwab
And leading indicators are beginning to reverse.
The U.S. Leading Economic Indicators (LEI) year-over-year percent change continued to decelerate in June per the @Conferenceboard.
The LEI peaked in April at ~17% YoY, we are now at ~12%. At this current pace, we will be near 0% in ~5 months or start of 2022. ???? @FactSet pic.twitter.com/c8D49VhCSq
— Matthew Miskin, CFA (@matthew_miskin) July 22, 2021
And economic numbers are beginning to underwhelm.
Economic data no longer coming in stronger relative to expectations as per @Citi U.S. Economic Surprise Index, which is now in negative territory; some survey-based data still strong, as shown by ISM Manufacturing New Orders; both have tended to move somewhat together pic.twitter.com/0kjLFC6GTs
— Liz Ann Sonders (@LizAnnSonders) July 27, 2021
Not surprisingly, some analysts are trimming GDP estimates.
Goldman: " We lowered our Q2 GDP tracking estimate to +8.0% (qoq ar) from +8¼%, reflecting weaker than expected new home sales in June and downward revisions to prior months."
— Bill McBride (@calculatedrisk) July 26, 2021
US population is also slowing. A longer term problem.
In half of all U.S. states last year, more people died than were born, up from five states in 2019. Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020, the lowest ever documented. https://t.co/G8xxqx08eX
— Lisa Abramowicz (@lisaabramowicz1) July 26, 2021
The State Of The Market
China stocks are doing poorly, to put it lightly.
The KWEB China Internet ETF is down to all time lows relative to the S&P 500..This comes just a few months after the ETF was at all time highs versus the index! An entire decade of outperformance has been wiped out in a matter of months – Bear Traps Reports pic.twitter.com/fJAU63QLsA
— zerohedge (@zerohedge) July 27, 2021
Because China’s government is meddling in, what feels like, everything.
“Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care. But it’s not that simple. Beijing is pursuing other goals: reining in the power of its tech titans and boosting startups; protecting social equality; and making sure the cost of living in cities isn’t so high that families aren’t willing to have children. And Beijing is suspicious of companies that are skilled at raising capital overseas—beyond its watchful eye.” – Shuli Ren (Bloomberg)
And China’s fall is affecting emerging markets indices, since it’s a huge contributor to EM.
Good S&P post showing that generic EM, now touted as more SPX-like, is basically a bet on China
https://t.co/ePf9FVNtgB pic.twitter.com/ViKQCVHW9Q
— Lawrence Hamtil (@lhamtil) September 17, 2020
The MSCI Emerging Markets equity index is now down year-to-date due to the selloff in China's shares. pic.twitter.com/gGF5ABA6cR
— (((The Daily Shot))) (@SoberLook) July 27, 2021
lowest weekly close for Emerging Markets $EEM Year-to-Date, and the lowest relative close EVER pic.twitter.com/eMMjbk8K2H
— J.C. Parets (@allstarcharts) July 24, 2021
But it’s yet to impact US stocks.
Lots of tough rhetoric within and around China lately, but that hasn’t put a dent in companies with high sales exposure to country (orange) … cohort is outpacing Russell 1000 (blue) over past few years by nearly 8%
[Past performance is no guarantee of future results] pic.twitter.com/wN59sbYSEh— Liz Ann Sonders (@LizAnnSonders) July 27, 2021
In fact, US stocks keep rising.
2021 Returns…
US Internet Stocks $FDN: +18%, all-time high today
China Internet Stocks $KWEB: -28%, 52-week low today
Charting via @ycharts pic.twitter.com/ryNWPeak7z
— Charlie Bilello (@charliebilello) July 23, 2021
But there is a new #1 fear in the market.
“…fears over new Covid-19 variants overtook inflation worries as the largest risk to markets.” – DB survey of market professionals pic.twitter.com/32IJ6OZ0V6
— Sam Ro ???? (@SamRo) July 26, 2021
It’s been a while since a fear really materialized, historically speaking.
SPX uninterrupted bull markets (without a -10% swing down.) pic.twitter.com/a0inWnqSbV
— Nautilus Research (@NautilusCap) July 26, 2021
Though this will be an important week in the market.
As of July 8th the total market cap of the S&P 500 was at $36.32T
The total market cap of S&P 500 stocks that report earnings tomorrow is around $10.8T
That means ~29.75% of the total market cap of the S&P 500 reports earnings tomorrow alone ????
— Bullish Rippers (@BullishRippers) July 27, 2021
Charts Of The Week
This will never get old for me pic.twitter.com/rFtO2yrWcZ
— Gannon (@gannonbreslin) July 23, 2021
The Crocs brand is on fire. pic.twitter.com/rWxrlskOn6
— Web Smith (@web) July 24, 2021
Coffee prices are surging as unusually cold weather conditions threaten Brazilian production. pic.twitter.com/mjs6qP7a20
— (((The Daily Shot))) (@SoberLook) July 27, 2021
Interactive shirt using @SnapAR pic.twitter.com/F5LHGetNbw
— Hart Woolery (@2020cv_inc) July 22, 2021
Story Of The Week
How Thieves Stole $40 Million Of Copper By Spray-Painting Rocks In Turkey: https://www.bloomberg.com/features/2021-painted-rocks-copper-heist/
Disclosure
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