Perspectives

Ever since the stock market bottomed in 2009 during the financial crisis, people have been coming up with reasons why the bull market was about to end. We heard every reason – Brexit, the end of Quantitative Easing, too much debt, COVID, etc. – and while we understood each may be a cause for consternation, we focused on valuations, which suggested the bull market would continue. Over time, math wins. After the recovery in stocks from the 2020 lockdowns (and especially the latest surge in eq… View More

Fourth quarter 2020 earnings and revenue growth both surprised with positive results. With more than 75% of companies reporting, earnings growth is expected to be 3.4%. This is a significant increase compared to the -1.03% originally estimated on January 1st and further improvement from last week’s 2.4%. Revenue growth is also expected to be positive at 1.3%, up from -1.4% at the start of the year. In aggregate, companies are reporting earnings that are more than 17% above estimates, outpacin… View More

While higher commodity costs could challenge the industrials sector, it could also significantly boost earnings per share (EPS) for the energy sector. From 1995 to 2015, energy contributed approximately 12% to the overall index EPS while over the last 12 months, it has detracted about -7%. A return to profitably for the energy sector may be the key for index EPS to surprise to the upside in 2021 and 2022. By the end of 2021, current estimates are only suggesting a 2% contribution to overall earn… View More

With just less than 40% of S&P 500 companies reporting for the 4Q earnings season, results continue to come in quite strong. Estimated sales growth flipped positive for the overall index, and earnings growth is now estimated to be down only -1.6% led by the Technology and Financial sectors. The energy and industrial sectors continue to be the biggest laggards. Greater than 80% of companies are beating estimates for the 3rd quarter in a row, more than 80% of companies reporting have beaten ea… View More

Because we have been getting a lot of inquiries about Gamestop (GME), AMC Entertainment Holdings (AMC), Express (EXPR), and other such companies, we wanted to share some of our thoughts on the risks involved with trading these names now. We believe that the volatility and risk associated with these stocks are just too great to take any type of position (long or short). The market is a sophisticated "barter" system. It matches buyers and sellers in real-time. Like any other market, when demand … View More

Saving and fiscal stimulus are providing income replacement, so we see no cascading financial crisis. Also, productivity gains and inventory rebuilding argue for a boost to growth in 2021. The Blue Chip consensus U.S. real GDP forecast is 4.2% for 2021; we believe up to 6% is likely. Growth in China has also been a key support for global economic activity in 2021. Manufacturing has performed well (goods > services) in the global economy. For this reason, rising COVID-19 case counts in China … View More

Stocks closed lower on Friday as President Elect Biden released plans for a $1.9 trillion dollar COVID-19 relief package. On Friday, tech shares gained while banks led the decline of financial stocks after some of the largest players released less than stellar earnings reports. This short-term selloff goes against the long upward trend for stocks. The S&P 500 hit a record high during the first week of the year, only to fade slightly last week. Energy stocks led the market last week as oil pr… View More

We have received a number of questions from clients on what we can expect with the new Administration in Washington. Potential tax increases have been the number one question from clients over the past week. We see fiscal stimulus coming in two parts, with the first package focused on income replacement which can pass by the end of February. The second package, which will likely be considered mid-year, is a more complicated legislative vehicle, focused on long-term structural changes to the US e… View More

After one of the craziest weeks I can ever remember, Equity markets surged higher on expectations that Washington DC is poised to deliver more financial stimulus. The Senate runoff races in Georgia were both won by Democrats and they have been promising $2000 stimulus checks to a large portion of the U.S. population. As a result, inflation expectations and a potential rise in economic activity fueled the S&P 500 index to a 1.59% gain last week. Cyclicals led the way as Energy, Materials, and… View More

Happy New Year! As 2021 gets underway, we want to start this morning by highlighting just how rare last year’s price action was. The March S&P low (2192) undercut the prior year’s low (2444), and last week’s year-end close (3756) was above the prior year’s high (3248)… we can find only 3 other examples in the last 90+ years where such is also the case (1935, 1982, and 2016). While hardly a robust sample, the S&P was up double-digits in the year following these past observation… View More