October 27, 2021

Market Performance (Prior Week)

Source: YCharts
Disclaimer: Past performance is no guarantee of future performance

The Good News

Earnings continue to be impressive

84% of $SPX companies have beaten EPS estimates to date for Q3, which is tied for the 3rd highest percentage since 2008. #Factset

— Stephanie Link (@Stephanie_Link) October 23, 2021

Earnings, in full swing: So far, the results have been good. The growth estimate for Q3 EPS has improved to 32% from 28% at the start of earnings season. pic.twitter.com/IRvRa1Z2Vx

— Jurrien Timmer (@TimmerFidelity) October 25, 2021

Big week for Q3 earnings with the #tech market cap heavyweights reporting.

Q3 results have been on 🔥

Beat rate 84%
Earnings growth 32.7%
Revenue growth 15.3%
Margins 12.5%

Thus far #financials & #tech sectors with positive surprises, a nice mix of #value & #growth. @FactSet pic.twitter.com/H8yzXtVPvu

— Matthew Miskin, CFA (@matthew_miskin) October 25, 2021

And margins seem to be holding in strong

Profit margins have gained increasing amount of attention this year given high input price pressures; but thus far, forward margin estimates have continued to rise in each quarter and are not yet rolling over to any significant degree pic.twitter.com/zkQDJ4uabv

— Liz Ann Sonders (@LizAnnSonders) October 25, 2021

After dismal September, companies with high/stable profit margins are outperforming those with low variable margins by most since April
⁦@Bloomberg⁩
[Past performance is no guarantee of future results] pic.twitter.com/DWZrWTgiWr

— Liz Ann Sonders (@LizAnnSonders) October 26, 2021

And leading indicators slowing but still strong

Leading indicators – LEADING Indicators – continue to show tremendous strength on a 6-month basis. Hard to see the economy faltering anytime soon with these healthy data pic.twitter.com/vhDw3VSrIz

— Richard Bernstein (@RBAdvisors) October 21, 2021

And more longer term, but capex is picking up steam

MORGAN STANLEY: The US is seeing “the strongest capex cycle since the 1940s, driven by business investment in equipment and intellectual property rights. In the US, capex should reach the pre-Covid trend as early as 4Q this year.” pic.twitter.com/g43Jmfbknw

— Carl Quintanilla (@carlquintanilla) October 22, 2021

The Bad News

Although still strong, earnings are lower

As everyone focuses on the hot YoY numbers (base effects) and all the 'beats' (the enduring game on Wall St), they're missing the QoQ sequential decay in Q3 EPS (-10%) and sales (-1%).

— David Rosenberg (@EconguyRosie) October 26, 2021

And, okay, I may have called my shot a little early last week

An *unprecedented* 100 cargo ships are waiting to enter the ports of Long Beach and LA as of Tuesday https://t.co/NB7sCiuR0Q

— Rachel Premack (@rrpre) October 20, 2021

There's a bunch of ships headed right now to the West Coast, and they're set to make the bottleneck even worse https://t.co/t2YEgobw7X pic.twitter.com/CnzJY5kktO

— Joe Weisenthal (@TheStalwart) October 22, 2021

And inflation expectations continue to march higher

Big day for five-year breakevens — highest since 2005 — on the same day there's HUGE demand at the 5-year TIPS auction. https://t.co/i4WNQhOyIA via @beth_stanton @MarkTannenbaum1 pic.twitter.com/qGL7fqDToG

— Kriti Gupta (@KritiGuptaNews) October 21, 2021

The State Of The Market

Social media and ecommerce aren’t even deflationary right now? Yikes

'Ecommerce sites have become contributors to rising inflation, bucking a years-long trend and heralding the prospect of higher prices and fewer discounts on a wide range of products this holiday season.' https://t.co/Q4Yu22ofkr pic.twitter.com/SqOK69tnJr

— Jesse Felder (@jessefelder) October 21, 2021

So now the supply chain crisis is hurting digital media stocks.

What’s the point of advertising stuff if you can’t get your goods off the boat? https://t.co/RHfnj1Dq46

— Joe Weisenthal (@TheStalwart) October 21, 2021

With the economy booming and inflation surging, rate hike expectations are moving forward

3 Fed 🏛 hikes next year? 🤔 pic.twitter.com/Dng6m5j7eO

— Win Smart, CFA (@WinfieldSmart) October 22, 2021

Which isn’t necessarily bad for the market

Low and rising interest rates. Often bullish $SPX pic.twitter.com/n7hzOF2FHA

— Mike Zaccardi, CFA, CMT (@MikeZaccardi) October 26, 2021

And China remains a problem for the global economy

Chinese companies have defaulted on a record of at least $8.7 billion of offshore bonds so far this year, with the real estate industry accounting for one-third of that amount. https://t.co/89ArdW3VI4 pic.twitter.com/K2RpOM6nQX

— Lisa Abramowicz (@lisaabramowicz1) October 26, 2021

Is China in Big Trouble? asks @paulkrugman. Quite possibly thanks to real estate investment that dwarfs U.S. real estate investment before the GFC. Chart from his piece is h/t Kenneth Rogoff and Yuanchen Yang https://t.co/9XUxVnymdD pic.twitter.com/LRt7fUqFBo

— John Authers (@johnauthers) October 25, 2021

The China Credit Impulse fell to a 10 year low this Sept. & leads global growth momentum by 6 months.

The % of OECD countries w/ rising lead indicators MoM is down to 57% from 95% in July.

China is a major driver of the global business cycle & currently leading the cycle lower. pic.twitter.com/e1prZ563ay

— Julien Bittel, CFA (@BittelJulien) October 25, 2021

B of A: “China GDP growth has increasingly mattered to S&P earnings, more so than US GDP .. About 30% of global GDP growth over the past two decades has come from China (vs. 21% from the US).” [Subramanian] pic.twitter.com/OGnIQh9aQw

— Carl Quintanilla (@carlquintanilla) October 18, 2021

$SPX generates 40% of revenues outside the U.S. https://t.co/qYEUyAfQJA pic.twitter.com/L4BwI5run8

— FactSet (@FactSet) October 26, 2021

And lastly, welcome to the big five, Tesla

Tesla’s market cap tops $1 trillion and is worth more than these automakers combined.. pic.twitter.com/r3jkbQi6WX

— George Maroudas (@ChicagoAdvisor) October 25, 2021

Holy cow.

Elon Musk's wealth has soared past a quarter of a trillion dollars. He's absolutely leaving Bezos in the dust. https://t.co/Ohk1SEdtTO Great chart spotted by @DavidInglesTV $TSLA $AMZN pic.twitter.com/ZqojaBTgAs

— Joe Weisenthal (@TheStalwart) October 25, 2021

Today Elon Musk became the richest man in the world with his net worth reaching $255 billion

What's crazier?

He is now worth more than every MLB, NBA, and NFL team…combined at $241 billion pic.twitter.com/MZXe64M0qk

— Liam Killingstad (@LiamKillingstad) October 25, 2021

I don't think people comprehend how much money $300 billion is.

That's enough to buy up all the goods and services more than 1/2 the states produce in an entire year. https://t.co/rcn8dTORZH pic.twitter.com/dOcvxK8II2

— Jake (@EconomPic) October 26, 2021

Chart Of The Week

Here's the new chart $BITO added. Two days of trading to crack $1 billion. https://t.co/DqSxR4VB7x pic.twitter.com/eCrTe09Rql

— James Seyffart (@JSeyff) October 20, 2021

🤯 Global equities logged >$1 trillion dollars worth of inflows during the last 51 weeks.

🔹 For context, the prior best rolling 51 week record was +$250 billion.

🔹 2021 is 4x larger than the next best yearly inflow.

(via GS) pic.twitter.com/Ylsw0NtVQy

— Michael Goodwell (@MichaelGoodwell) October 24, 2021

Disclosure

Clear Rock Advisors, LLC is registered with the SEC as a registered investment advisor with offices in Texas. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by Clear Rock Advisors, LLC) or any investment-related or financial planning consulting services will be profitable, equal any corresponding indicated historical performance level(s), or prove successful. It remains the client’s responsibility to advise Clear Rock Advisors, LLC, in writing, if there are any changes in the client’s personal/financial situation or investment objectives for the purpose of reviewing, evaluating or revising Clear Rock Advisors, LLC’s  previous recommendations and/or services, or if the client would like to impose, add to, or modify any reasonable restrictions to Clear Rock Advisors, LLC’s services. A copy of Clear Rock Advisors, LLC’s current written disclosure statement discussing its advisory services and fees are available upon request.