Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 43

  • Welcome to November!  Incredibly, the holiday season is quickly approaching.
  • The US stock market (S&P 500) gained over 1% last week.  October’s gain of nearly 7% was its best month since last November. All sectors gained last month led by energy and consumer discretionary which are both up over 10% (CNBC, October 2021).   Growth outperformed value.
  • On October 20, the S&P 500 closed at its first all-time high since early September. Since then, it has hit multiple record highs and has now hit 58 record closing highs for the year.  At this pace, there will be 70 record highs for 2021. According to Bespoke Investments, looking at data going back to 1950, that would rank as the most record closing highs since 1995 and the second most of all years. Before 2021, there have only been three other years (1964, 1995, and 2017) with more than 60 record highs.  Bottom line, it’s been a really good year so far (knock on wood)!
  • We are still in the thick of 3Q earnings seasons and last week the five largest companies in the S&P 500 reported. According to Bespoke Investments, of the companies that have already reported, 76% have beaten earnings per share estimates while 70% have topped revenue forecasts. By historical measures, these qualify as great “beat rates”, but they are not quite as good as 2Q’s.
  • Last week, Inflation notched a fresh 30-year high as measured by the Fed’s favorite gauge. According to CNC, headline inflation, including food and energy, rose at a 4.4% annual rate in September, the fastest since 1991. Core inflation, which is the Fed’s preferred gauge, increased 3.6% for the 12 months, the same as in August but still also the fastest pace in 30 years (October 2021).
  • With inflation numbers higher lately, a common question is what will happen to mortgage rates? They might move higher, of course, but it’s still a great time for mortgage rates.  As of last Friday, Bankrate.com showed the average APR for a 30-year fixed mortgage was 3.30%. This compares to the 50-year average of 8% (Bankrate, October 2021).
  •  Despite the prior two bullets, Ten Year Treasury Yields dropped nearly 10 basis points last week, closing at 1.56%. A week ago from last Friday yields hit a high of 1.69%, their highest levels since May 13 (Yahoo Finance, October 2021).
  • One contributing factor for lower longer-term rates is bond traders are pricing in more aggressive 2022 rate hikes than policymakers are indicating. At current estimates, there are two or possibly three rate hikes in 2022 (CNBC, October 2021).
  • Bitcoin prices finished slightly higher last week, closing at around $62,000. Ethereum hit a new high last week over $4400.  
  • This week’s economic data schedule is fairly active, but the highlight will be Friday’s Employment Report for September. The consensus is for over 400 thousand jobs added, and for the unemployment rate to decrease to 4.7%. For a frame of reference, there were 194k jobs added in August, and the unemployment rate was at 4.8% (Calculated Risk Finance & Economics, October 2021). 
  • The Fed will also begin its two-day meeting Tuesday. It is expected to announce unwinding its $120 billion in monthly bond purchases and end the program entirely by the middle of next year.
  • ETF demand continues to be off the chain.  According to Goldman Sachs (October 2021), US ETFs took in +$82B in October, taking YTD to $719B (+45%  from the prior record for full-year 2020 = +$494B). October marks the 4th largest monthly net inflow on record (largest still being Mar ’21 +$99B).
  • The “FANG” stocks will now become the “MANA” stocks.   With Facebook changing its name to Meta, we will now have Meta-Amazon-Netflix-Alphabet (since Google had already changed its name to Alphabet).
  • Speaking of Google, my father-in-law is a fan of the futurist Peter Diamandis and has recommended to me some of his challenging yet interesting reads.  This past week I stumbled across this Diamandis-authored article which was a short read listing Google’s 8 Innovation Principles.
  • Klement on Investing had another good short read recently.  In his recent post, Narratives matter, Klement talks about how good stories can quantifiably increase the value of something.  As he concludes:  “..if a good story increases the value of a simple mug or a hat by 25% to 80%, then you can imagine what it does to stocks, houses, art, etc.”.
  • This week’s guest on Orion’s The Weighing Machine will be Mike Van Wyk from The Capital Group.  Mike’s topic was the advisor survey conducted by the Capital Group called Pathways To Growth which outlined what made the most successful advisors so successful.
  • Here’s an “Awesome” picture for this week.  It started to get a little chilly here this past week, so I figured it would be awesome to be looking out of an island cave at the ocean.

  • For more resources, please check out the Financial Advisor Success Hub, and as always, please let us know what we can do better at rusty@orion.com or ben.vaske@orion.com.
  • Thanks for reading and have a great week!

2798-OPS-11/3/2021

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).