In theory, the combination of a supportive Fed and increased fiscal spending will result in inflation. If it’s based on growth (not a supply shock), inflation is positive for risk-assets including equities, commodities and real estate. Staying just with equities and assuming a ~2% Fed
Tech companies tend to report later in earnings season, but a handful of names that reported better than expected results last week traded lower, raising concerns about crowded positioning in the sector. Concentration issues are common in sectors that display secular growth characteristics but high
This week marks the peak of Q2 earnings season with ~38% of S&P 500 companies scheduled to report. About 25% of the S&P 500 have already reported with 81% beating consensus vs the 5-year average beat rate of 72%. The average earnings surprise thus far
The bullish equity narrative includes: 1) much faster than expected economic recovery to date; 2) increased fiscal support; 3) ongoing monetary policy support; 4) light equity positioning/elevated bearish sentiment; 5) relative valuation to bonds and; 6) an eventual acceleration of buybacks.
The S&P 500 pushed through technical resistance on Monday, which makes the old cycle high of ~3225 new short-term support. Longer-term technical support exists in the 3090-3120 zone. The technical push through consolidation levels helps make the case for further near-term gains, but today’s uptick
This seems like an appropriate time to dust off the adage that ‘bull markets climb a wall of worry.’ The adage refers to a period of equity market resiliency despite apparent strong headwinds and broad investor skepticism. The adage I just gave you is the
It’s still very early with only 55 companies in the S&P 500 having now reported Q2 results. Of those reporting, 75% have beat consensus earnings against a low bar vs the 1-year average of 71% and 5-year average of 72%. Qualitative management commentary mostly discuss
: A fifth US coronavirus relief package will be in focus this week and we may begin to see details on the GOP proposal later today. Media reports suggest the $600/week of additional federal unemployment benefits will be cut down to ~$200-400 with some form
The outperformance from value sectors (Financials, Materials and Energy) this week looks more like portfolio rebalancing than a large scale commitment to the group. Portfolio Managers were underweight Financials coming into Q2 earnings based on concerns over massive reserve builds and reserve guidance. They got
The recent outperformance in cyclical/value sectors follows better economic data (US ESI at record +270.80), some renewed vaccine optimism and expectations for a near term peak in the most recent regional hotspots. The first wave of infections was in the Northeast and the second in
