Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 56
- Wow, what a Super Bowl! What was your favorite Super Bowl commercial this year? I vote for the E*TRADE or Larry David ads.
- The overall market ended last week down about -1%, the losses were led by growth stocks.
- The overall US stock market is now down over 7% for the year, with growth stocks down over 12% and value stocks holding a modest gain of almost 1%
One-year trailing returns:
- Overall, the US stock market is up 10% with the S&P 500 up about 14%.
- Value has outperformed Growth 20% to -1%.
- With the bond market down nearly 5% over the last 12 months, Diversifiers are outperforming including diversified alternatives at nearly 4% and commodities at nearly 32%.
- Last week, the Ten Year Treasury Yields ended the week at 1.95%. The intraday high yield last week was 2.06%.
- The big economic data last week was the Consumer Price Index (CPI). The new figures showed a year-over-year increase of 7.5%, which is the highest level since 1982.
- Earnings season continued last week, now with 72% of companies in the S&P 500 having reported earnings for Q4 2021. Here are some highlights from Factset’s weekly earnings season update as of February 11, 2022:
- For Q4 2021 (with 72% of S&P 500 companies reporting actual results), 77% of S&P 500 companies have reported a positive earnings per share surprise at an average level of 8.6% above estimates. This earnings beat rate is above the five-year average.
- The S&P 500 is reporting earnings growth of more than 30% for the fourth straight quarter and is now at a 2021 growth rate of 45%.
- Positive earnings surprises for the fourth quarter have been led by the healthcare sector, other top contributors are consumer discretionary, information technology, and financials.
- Investor sentiment remains quite cautious, according to the AAII Investor Sentiment Survey. This tends to happen before above-average gains in the months ahead.
- Did you know? The Russell 2000 has lagged the S&P 500 by 25 percentage points in the past 12 months, its worst relative 12-month return since 1999, notes Goldman Sachs’ David Kostin. Small caps are on sale too, according to the January 2022 Starting Points Matter chartbook. Small caps have on average traded at basically a 20% discount to the overall market over the last 20 years plus. They are currently at a 45% discount! By the way, historically small caps outperform when inflation is high. They also, regretfully, tend to underperform if the economy is slowing (even if the absolute level of economic growth is strong).
- Given the strong performance of a handful of large cap growth names, it’s been difficult for actively managed funds to outperform over the last decade. Has the corner been turned though? Last year, most domestic funds outperformed their benchmarks.
- Another quick tasty read from one of Ben Carlson’s daily commentaries last week: The 8 Biggest Investing Myths
- For the week ahead, the economic schedule contains the Producer Price Index (PPI) for December on Tuesday, the consensus estimate is for a 0.5% increase in PPI. On Wednesday, the retail sales figures for January will be released, the consensus is that we will see a 1.8% increase. We will also get the minutes from the last Federal Open Market Committee meeting on Wednesday.
Crypto Corner – Grant Engelbart, CFA, CAIA, Brinker Capital Sr. Portfolio Manager
- Cryptocurrency prices were mixed last week. Bitcoin gained just over 1%, while Ethereum fell almost 4%. Ripple shot up 20%, while Solana dropped nearly 18%. Dogecoin and Avalanche notched gains.
- Big 4 accounting firm KPMG announced they added Bitcoin and Ethereum to the balance sheet of their Canadian arm. The EU announced a digital euro coming sometime next year. The big news of the week was the arrest of two individuals accused of laundering around $4.5 billion in Bitcoin from the Bitfinex exchange, $3.6 billion of which was recovered by the government. Heather Morgan, one of the accused, is prominent on social media, is a Forbes contributor, and even raps under the name Razzlekhan! Don’t worry, Netflix has already greenlit a documentary!
- Valkyrie, which was second to market with their Bitcoin futures ETF (ticker BTF), launched a Bitcoin miners ETF last week (WGMI).
- This week on Orion’s The Weighing Machine podcast is Geremy van Arkel from Frontier Asset Management. While one could make a strong argument that Orion’s own Dr. Daniel Crosby has the best hair in the industry, Geremy would also be on the shortlist for consideration. Geremy is a multiple-decade veteran in the profession, a podcast host, and a funny fellow. We cover a lot of ground, including investment philosophy to market outlook to ’90s music.
- “Humans are wired to act; markets tend to reward inaction.” ― Daniel Crosby, The Behavioral Investor. I figured since I just mentioned the good doctor, I should use one of his quotes from this list: Daniel Crosby Quotes
- The Oscar Nominations are out. Looks like I have some movie watching to do in the weeks ahead.
- When it comes to writing, simple is smart. Easier said than done! Tips from The Atlantic include this excerpt about keeping it simple: “High school taught me big words. College rewarded me for using big words. Then I graduated and realized that intelligent readers outside the classroom don’t want big words. They want complex ideas made simple. If you don’t believe it from a journalist, believe it from an academic…(which includes) Columbia University psychologist Adam Galinsky’s study and other research.”
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- Have a great week!