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Market Strategy 11/08/2021

  • John Stoltzfus
  • November 8, 2021

What’s the Market Telling Us?

Strong rallies in both bonds and stocks last week suggest that investors are embracing the upside for stocks as the Federal Reserve announces plans to taper its monthly bond buying program
Key Takeaways
  • With 447 or 89% of the companies in the S&P 500 index having reported, earnings are up 41.3% from a year earlier on revenue growth of 18.5%. At this late point in the season, 81% of firms have beaten analyst estimates.
  • With Q3 earnings season winding down, economic data and the progress in economic re-openings will gain in importance in investors’ focus from here to the end of the year.
  • Six key stateside equity indices posted record highs last Friday, evidencing greater appetite for broad diversification across market capitalizations and sectors.
  • Economic data released last week broadly surprised to the upside suggesting that the US economy is about to move into “next new normal.”
federal reserve

Better than expected economic data, the Federal Reserve Board’s announcement that it plans to taper its monthly bond buying program as early as this month, a continuation of better than expected earnings results in Q3 earnings season and a rally in Treasury bonds took yields lower and pushed six key stateside equity benchmarks to new record highs last Friday.

The benchmarks in the spotlight last week included: the Dow Jones Industrial Average, the S&P500, the S&P 400 (mid-caps), the S&P 600 (small caps), the Russell 2000 (small caps) and the NASDAQ Composite (over 40% weighted in tech or tech related stocks). From the start of this year through last Friday the aforementioned six indices have respectively advanced in price: 18.69%, 25.07%, 25.95%, 30.99% 23.41% and 23.92% through last Friday.

Particularly noteworthy last week was the broad distribution of record highs posted among the major indices and across mid and small market index capitalizations. Such broad appetite for stocks including large, mid, and small stocks; value oriented re-opening stocks as well as for technology stocks (representing a significant component of growth) suggests to us that the rally in stocks could carry on through the end of the year notwithstanding the potential for a catalyst always to appear at some point that could make some investors pause and ponder while bears, skeptics, and nervous investors find opportunity to take some profits without FOMO (fear of missing out).

Quotation from Aenean Pretium

Market inflation fears looked somewhat tempered last week after the Federal Reserve Board announced its plans to taper its monthly bond buying program.

Oil prices came off the boil last week falling 2.75% after the Biden Administration suggested it might tap the US Strategic Oil Reserves to counter the recent surge in oil prices. Foreign oil producers (represented by OPEC) were dismissive of President Biden’s appeal for increased production of oil to counter the surge in prices this year. As we went to press on Sunday night the price of oil (Brent Crude) was up 1.7% since Friday.

Don’t Just stand there do something!

Market inflation fears looked somewhat tempered last week after the Federal Reserve Board announced its plans to taper its monthly bond buying program.

An improvement in job growth for the month of October and upward revisions to numbers released in the prior two months along with a continuation of revenue and earnings growth surprises in S&P 500 Q3 earnings season added positively to the picture with seven of the benchmark’s 11 sectors posting double digit earnings growth through last Friday in Q3 earnings season

Where to from here?

We are frequently asked by investors how much further can stocks go from here with a broad array of US equity benchmarks at record highs and with consensus earnings estimates for the S&P 500 at 21.7x forward estimates (see page 8 for details on valuations across an array of indices stateside and internationally).

We respond that much of the equity market’s potential for the months leading to the end of the year and into 2022 reside in: economic data in the months and quarters ahead; the direction and sensitivity of Fed monetary policy; the bond market’s response whenever rates begin to move higher and stick as it addresses inflation as well as other issues; the trajectory of corporate revenue and earnings growth; the process of innovation in technology and biotechnology and their respective impact on society and corporate profits; the effect of the traditional infrastructure program of scale that emerged from negotiations on Capitol Hill as well as the effects of domestic and geopolitical policy in a period where the markets have become increasingly politicized.

Above all, fundamentals are likely to matter to market performance. Improvements leading to recoveries across the global supply chain and a turnaround of current labor shortages stateside and elsewhere will remain a priority focus along with pandemic risks to economic re-openings in progress. This is plenty for investors to ponder and navigate in the months ahead.

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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