November 10, 2021
Market Performance (YTD)
Disclaimer: Past performance is no guarantee of future performance
The Good News
Jobs report beat expectations
Jobs report was spicy (but in a good way, like Sriracha)
▫️ 531K new jobs vs. 420K expected
▫️ Unemployment rate: 4.6%, down from a pandemic high of 14.8%.
— Morning Brew ☕️ (@MorningBrew) November 5, 2021
EPS surprises have been historically good
S&P 500 EPS growth has surprised consensus estimates over the past 12 months by a record 23.9%! pic.twitter.com/C5dlG35wlJ
— Julien Bittel, CFA (@BittelJulien) November 6, 2021
And Q3’s earnings have also been impressive
Earnings season is wrapping up and once again, it was super impressive.
Here's our latest Earnings Season Dashboard that breaks down Q3 earnings season. pic.twitter.com/03bFmn7wvc
— Ryan Detrick, CMT (@RyanDetrick) November 8, 2021
The Mixed News
While earnings are still impressive, surprises are coming in lower
3Q earnings, sales surprises were the lowest in six quarters pic.twitter.com/dMx34RXr6i
— Mike Zaccardi, CFA, CMT (@MikeZaccardi) November 10, 2021
The Bad News
And investors are punishing those companies that miss even more so than normal
This was before Zillow, Peloton and some of the other bombs.
H/t @TheBenSchmark pic.twitter.com/CLcMBpgitv
— Michael Batnick (@michaelbatnick) November 5, 2021
And maybe we should be paying more attention to this? (Thread)
1/4 talking heads gushing over 80% of companies beating EPS. this has become a meaningless metric over time. its no longer surprising when >70% of companies "beat" EPS. we should stop referencing it. pic.twitter.com/eGkDkdx55V
— MrBlonde (@MrBlonde_macro) October 27, 2021
The State Of The Market
It continues to be a good year, especially this most recent stretch
The S&P 500 is now up 17 of the past 19 days.
Last time that happened was 1971.
— Callie Cox (@callieabost) November 8, 2021
The S&P 500 has been up in 16 out of the last 18 sessions. pic.twitter.com/57ciM4Zahx
— (((The Daily Shot))) (@SoberLook) November 9, 2021
So investors haven’t meaningfully flinched at inflation, yet.. Probably because companies continue to successfully pass along the price increases.
B of A: “Despite many headwinds (supply chain, outsized labor/commodity inflation, etc.), S&P 500 net margins (ex-Fins) remained at a record high in 3Q ..” pic.twitter.com/6ZLpC7ZpTx
— Carl Quintanilla (@carlquintanilla) November 8, 2021
S&P 500 margins have remained elevated despite supply chain issues and inflationary pressures. Question is how long this is sustainable if inflation sticks around. We're still looking at a decent buffer in margins though–a minor hit would be just that…minor. pic.twitter.com/cN4tAwNNJi
— Liz Young (@LizYoungStrat) November 9, 2021
But just this morning, we saw yet another higher than expected inflation print
*U.S. OCT. CONSUMER PRICES INCREASE 0.9% M/M; EST. 0.6%
*U.S. OCT. CONSUMER PRICES RISE 6.2% Y/Y; EST. 5.9%
— Katie Greifeld (@kgreifeld) November 10, 2021
And it’s not just the US. Look at China and Brazil.
China’s PPI climbed 13.5% YoY, hitting fastest pace in 26 years & beating the median forecast for a 12.3% gain, data from National Bureau of Statistics showed Wednesday. The consumer price index rose 1.5%, fastest pace since September 2020 & above projected 1.4% gain.@business pic.twitter.com/kuVJ7MFGfT
— Danielle DiMartino Booth (@DiMartinoBooth) November 10, 2021
It's amazing how quickly Brazil got back to double-digit inflation, which it hadn't seen since early 2016. Lends credence to expectation-based theories of inflation. BCB now playing aggressive catch-up. Recently surprised mkt w/ 150 bp hike & signalled another 150 bps next month. pic.twitter.com/cpg4txlFRL
— Jesse Livermore (@Jesse_Livermore) November 10, 2021
And many of these emerging market countries are playing catch up by hiking rates
Here’s a chart looking at the % of global central banks cutting rates.
Today, that number is 70%, down from 98% in Q1.
Put differently, nearly a 3rd of global CBs have shifted policy stance.
This tightening will be a headwind for global growth in 2022.
A key chart to monitor. pic.twitter.com/JAygQ7mqtX
— Julien Bittel, CFA (@BittelJulien) November 10, 2021
And investors are increasingly expecting sooner rate hikes here in the US
3 Fed 🏛 hikes next year? 🤔 pic.twitter.com/Dng6m5j7eO
— Win Smart, CFA (@WinfieldSmart) October 22, 2021
Which would probably hurt stocks
The stock market’s big dogs keep getting bigger. There's a connection to the flattening yield curve & low yields, because big stocks' earnings tend to be a long way in the future. h/t PanAgora, @AndrewLapthorne @biancoresearch @VincentDeluard https://t.co/4sFw9kqwlO @bopinion pic.twitter.com/5kqliBLFZv
— John Authers (@johnauthers) November 8, 2021
But the Fed is in a tough spot because we’ve probably also reached peak growth
🇺🇸 Peak growth = peak earnings revisions… pic.twitter.com/ydaQXstzKG
— Julien Bittel, CFA (@BittelJulien) November 5, 2021
But on the flip side, consumers and corporations are still incredibly financially healthy
The modern US consumer: More Wealth, Less Debt
— Carl Quintanilla (@carlquintanilla) November 9, 2021
The growth in corporate cash balances in recent years is the fastest in two decades, leaving US companies with nearly $7tn in cash as of Q2 2021 pic.twitter.com/dsOLc0I6ql
— Mike Zaccardi, CFA, CMT (@MikeZaccardi) November 9, 2021
And contrary to the contrarian take, record highs are bullish
historically stocks usually go up after all-time highs, chart via @sherifa_issifu@SPDJIndices
also wrote a little bit about this yesteday https://t.co/SHzW7zONy0 pic.twitter.com/eBnByfRK32
— Sam Ro 📈 (@SamRo) November 9, 2021
Charts Of The Week
If you have a diversified #portfolio, you are seriously lagging the #market.
Question is what happens next?@RealInvAdvice @soberlook pic.twitter.com/VjWQmZiiYK
— Lance Roberts (@LanceRoberts) November 9, 2021
Took 13 years to get back to the pre-recession trend for aggregate labor income after the GFC.
Probably going to take less than two years from the onset of the COVID recession. pic.twitter.com/wRastqg89w
— Luke Kawa (@LJKawa) November 9, 2021
Nearly 85% of the US High Yield market has a yield below the current rate of CPI headline inflation pic.twitter.com/T49k80Hq8T
— David Schawel (@DavidSchawel) November 10, 2021
A relatively small number of stocks perform exceedingly well and raise the average index return significantly above the median.
Source: @SPGlobal pic.twitter.com/fWVInQXcgY
— (((The Daily Shot))) (@SoberLook) November 10, 2021
YTD worst year for government bonds since 1949 pic.twitter.com/60MjAD0aC2
— Mike Zaccardi, CFA, CMT (@MikeZaccardi) November 9, 2021
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