Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 40

Happy Monday! What a beautiful fall weekend, including high school homecomings and the opportunity to rake up a bunch of leaves! It may not feel that way yet given some of the volatile days to start the month, but the S&P 500 is up nearly 2% in October so far after gaining nearly 1% last week. The Dow Jones had its best week last week since June.

  • The S&P 500 finished last week right about 3% below its record-closing high on September 2. The markets took the punch of poor seasonals in September and a bunch of potential volatility-inducing news headlines (including Washington DC matters), and given the current seasonals/sentiment backdrop is now poised to maintain its bullish trend into year-end.
  • Starting off the new week, the bond market is closed Monday. That hasn’t stopped other prices from moving though. Energy prices and Asian tech are starting off the week particularly strong.
  • As for the bond market, last week bond prices moved lower and the Ten Year Treasury Yields moved higher, reaching a high of nearly 1.62% at one point — its highest level since June 4. Yields bottomed on August 4 at 1.12%. Yields closed last week at 1.61%.
  • As for what to watch for this week , the third-quarter earnings season is starting to assert itself, with a full schedule of major financial companies reporting results. JPMorgan and BlackRock report on Wednesday. Goldman, Bank of America, Morgan Stanley, Wells Fargo, and Citigroup also report during the week. It should be noted that Financials broke to new highs last week. Given that price action, I’m betting earnings for this sector will be better than expected this week.
  • Regarding earnings, S&P 500 earnings are expected to grow by nearly 28% in aggregate for the third quarter, slowing sharply from the second quarter’s nearly 90% growth rate, according to data from FactSet. Nonetheless, the 30% expected earnings growth rate for the third quarter would still be the third-fastest pace for the index since 2010. That said, I would still take the “over” on earnings growth for this quarter as economic expectations have really fallen in recent months.
  • Important economic data this week will include the U.S. consumer price index (CPI) for September. The Producer Price Index (PPI) is out Thursday.
  • Last Friday, the latest jobs report was released with nonfarm payrolls rising by 194,000 in September (well below expectations) and a decrease in unemployment by 0.4% to a new total of 4.8%.
  • Speaking of expectations, investors are still far from complacent right at the moment, according to the latest AAII Sentiment Survey. Bullish readings fell for the second week in a row down to 25.5%. Again, sentiment surveys tend to be contrarian in nature. Historically, when bullish sentiment is low, stock market returns tend to be above average in the months ahead.  In my seasoned opinion, this is a plus for the stock market going into year-end.
  • Bitcoin prices had another good week last week, hitting its highest price levels since May 12 by Friday. More investors are getting involved. For example, Soros Fund Management is bullish on Bitcoin, and has been for several years now. The CIO of Soros said last week, “I think it’s crossed the chasm to mainstream.” Also last week Bank of America analysts launched coverage of digital assets, saying the sector is simply “too large to ignore.” Also, it looks like my call from early in the year that we could get a crypto ETF by year-end still has a chance: Could there be 4 Bitcoin ETFs by the end of October?  As of this writing, Bitcoin is just under $57k.  Ethereum is just under $3600.
  • The stock market isn’t just having a great year. The ETF industry also continues to absolutely smash all kinds of growth records in 2021, including new ETF launches.
  • Check out this investment opportunity, which will be offered November 1. The investment?  Series I Savings Bonds   I bonds are 30-year bonds issued by the U.S. Treasury, which are available to anyone who opens a free TreasuryDirect account. Backed by the full faith and credit of the U.S. government, they have minimal credit risk. They also offer inflation protection, as their yields are indexed to inflation. There’s an annual limit of $10,000 per individual. That means a married couple with two children could buy up to $40,000 in total. If that family had a trust, another $10,000 could be purchased in the name of the trust, for a cumulative $50,000 in I bonds per year.
  • This week’s guest on Orion’s The Weighing Machine will be Carl Kaufman from Osterweis’s Strategic Income fund. Osterweis is a well-known active fixed income manager and Carl’s background and view on the fixed income markets was fascinating. He’s seen a few market cycles, and his experience was useful in trying to understand the current environment.  
  • By the way, last week’s The Weighing Machine podcast with Jeremy Siegel made Idea Farm’s Top 5 Podcasts of The Week.  Other top 5s on this list included an interview with Tom Brady and General Stanley McChrystal.  I might be biased, but it’s a cool list!
  • Speaking of podcasts, how about listening to one of the top leaders in our industry – Orion’s Eric Clarke!  The Investors First Podcast talks to Eric about the future of WealthTech and the Wealth Management Industry. The podcast was published October 7, 2021.
  • Okay, one more podcast, and this is for those who are interested in technical analysis, which simply is the study of market data to make investment decisions. A recent Fill The Gap podcast interviewed arguably the best technical analyst currently in the business today — Strategas’s technical analyst Chris Verrone, CMT.  Chris is really quite good, and gives an outstanding overview of the technical analysis process. As the CMT Association expands, the definition of technical analysis is grounded in behavioral economics and extends beyond classical pattern recognition techniques to include quantitative approaches to market research and rules-based trading system design and testing. Technical analysis provides the tools to successfully navigate the gap between intrinsic value and market price across all asset classes through a disciplined, systematic approach to market behavior and the law of supply and demand. So many take-aways from this podcast, including the one tidbit that Strategas does not allow its analysts to ever say something has a 100% or 0% chance of happening. In other words, anything is possible!
  • Here’s an “Awesome” picture for this week.  It’s a picture from Sedona – one of the most beautiful places in the United States.

2630-OPS-10/11/2021

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 serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand. Rusty is a host of Orion’s The Weighing Machine podcast and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has also managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive in 2017. Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments. Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA).