Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 15

Happy Monday! Hope you had a nice weekend. It was a nice Sunday in Omaha, but the chance of snow is actually in the forecast for the beginning of the week. 

Last Week in the Markets

Another great week for the stock market, with the overall market posting its 4th consecutive weekly gain and again pushing to new highs. It’s been a strong month so far too, with prices rising at an even faster pace than what the market rose in an above-average first quarter. 

The overall market is now up 12% for 2021 so far, with the average stock up 18%. The large-cap S&P 500 and tech-laden NASDAQ are also up 12% year-to-date. 

Over the last year, the overall market is higher by 57%, with the average stock sporting a 98% 1-year return. The large-cap S&P 500 is up 52% over the last 12 months. Gotta admit, I love citing those 1-year total return numbers. I’ve been in the investment industry in five different decades now (probably four more to go!) and I’ve never experienced trailing returns like this before —  and I’m not likely to experience it again. Then again, the markets always surprise. 

Deep Dive 

One reason for gains is that last week was an incredible week for corporate earnings, with a whopping average 84% better than expected beat rate last week in regards to reported first quarter earnings. At this pace, earnings are expected to be up 30% – the best potential quarter since the third quarter of 2010.

At this point, don’t forget that the second quarter is supposed to be the super strong quarter this year, with current expectations for earnings growth to be +56%. Earnings growth is then expected to “slow” in the second half with 21% growth expected in the 3Q and 15% in the 4Q. Keep in mind that long-term earnings growth tends to average just below 10%. It should be a great year for earnings with a current 28% year-over-year improvement in earnings for the entire year. 

Again, things are getting better faster than many expected. Put differently, expectations for earnings are rising very quickly, to the point that all appreciation in the S&P 500 this year has come from higher earnings rather than higher multiples on those earnings (source: BeSpoke Investments). To say yet another way, usually when the market has sharp gains in price, it’s due to the speculative increase in market multiples (valuations). This time, it’s not. It’s because of actual earnings growth. 

One positive for the market, and for growth stocks in general, is that 10-year Treasury yields fell from 1.67% to 1.59% last week. Given the strength of the economic data, this was actually a bit befuddling (at least to me). Many consider the bond market to be the “smart money.” Are bonds picking up something the rest of the markets aren’t yet?

On that last point, investor sentiment for bonds is very bearish and for stocks very bullish. If an investor knew nothing else, and only had sentiment data to make decisions on, these sentiment readings have historically suggested lower bond yields and lower stock prices in the near-term.

Cryptocurrency & Economic Data

One market that had a good week last week, but not a good weekend was Bitcoin. After hitting a new high of $65,000, it dropped 20% over the weekend. Was the successful Coinbase IPO last week the peak of crypto, or at least a short-term peak? Then again, bitcoin has risen about 800% over the last year. 

As for economic data last week, the economic calendar was packed. The highlights were Consumer Price Index (CPI), that came in higher than expected, but not as bad as some expected. Retail Sales meanwhile, had a blowout positive number. Economic data will be much lighter this week.

Wrapping it up

Sports highlights for the weekend, as least for this Omaha-based writer, was the NCAA volleyball championship in Omaha. Go Huskers!

For more resources on the economy and markets, including Partner content, check out the OPS Financial Advisor Success Hub.

As always, please let me know if you have any feedback or questions. You can reach me at rusty@orion.com.

If you have any questions on any strategy on the OPS platform, either how it should behave on a standalone basis or how it might blend with other strategies on OPS, please use research@orion.com.   

Have a great week!

 

1334-OPS-04/19/2021

The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

About Rusty Vanneman
Rusty Vanneman, CFA, CMT, serves as Chief Investment Strategist of Orion Portfolio Solutions. He has been with Orion since 2012, previously serving as President and Chief Investment Officer of CLS Investments. Prior to joining the Orion organization, Mr. Vanneman served as Chief Investment Officer and Managing Director for an RIA in the greater Boston area. His 11-year tenure at the RIA included a five-year span during which the firm was owned by E*TRADE Financial, where he also served as Senior Market Strategist for E*TRADE Capital. He also served as a Senior Analyst at Fidelity Management and Research in Boston. Mr. Vanneman received a Bachelor of Science degree in Management from Babson College, where he graduated with high distinction. He is a CFA charterholder and member of the CFA Institute. He also holds the Chartered Market Technician® (CMT) designation and is a member of the CMT Association.