Orion Advisor Solutions

Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 44

Last week saw the S&P 500 and small cap stocks reach record highs with strong earnings beats and robust job growth, while the Federal Reserve announced tapering asset purchases signaling potential rate hikes in 2022, Chinese exports surged, digital assets hit new highs, and concerns arose over faltering "work from home" stocks amid tightening liquidity conditions expected next year.

  • The S&P 500 Index closed at another record high on Friday, with a 7-day streak of positive returns to start November. The overall US market gained more than 2% last week.
  • Small cap stocks reached new highs, up over 5% last week, with small cap value up nearly 6%.
  • Over the past year, the average stock in the US market is up 55%, and the overall market is up 36%. This outperformance by smaller companies has benefited many active managers.
  • The “work from home” trade is faltering, with stocks like Peloton and Zoom well off their price highs.
  • Digital assets approached or hit new highs over the weekend. Chinese exports surged over 27% in October compared to a year ago, countering recent Chinese growth concerns. Elon Musk tweeted a poll about selling 10% of his stock; 58% of respondents said yes, and the stock dropped more than 5%.
  • The Federal Reserve announced asset purchases would be trimmed by $15B in November and December, with future pace undetermined. This could lead to a static balance sheet by mid-2022, after which the Fed may start raising short-term interest rates.
  • Earnings season is nearly over. According to Bespoke Investments, next 12-month EPS forecasts now top pre-COVID peaks by 25%. The current earnings beat rate is 74% (long-term average is 67%), and revenue beat rates are 68% (long-term average is 59%).
  • It’s been a strong year for investors, and the quarter is likely to finish strong. However, liquidity conditions may not be as favorable next year as monetary policy, fiscal policy, and personal income growth have peaked.
  • The big economic number last week was non-farm payrolls: 531,000 jobs added in October, beating the expected 450,000. The unemployment rate dropped to 4.6%. Average hourly earnings rose 0.4% in October and are up 4.9% versus a year ago.
  • The non-manufacturing ISM survey had its best number since inception in 1997, suggesting overheating is more likely than stagflation. Supply delays and prices paid are at near-record highs.
  • At the Tiburon Conference in Dallas, hot topics included ESG Investing and digital assets.
  • Ten Year Treasury Yields dropped 11 basis points to 1.45%, the lowest since September 22, 2021.
  • Bitcoin prices were slightly lower last week, closing around $61,000, but started this week at $65,000. Ethereum reached new highs at $4,700.
  • A recommended podcast: Tim Ferris with Chris Dixon and Naval Ravikant on Web 3.0, NFTs, and more.
  • This week’s economic schedule is active, with the Consumer Price Index for October as a highlight. Consensus is for a 0.6% increase in CPI and a 0.4% increase in core CPI.
  • Upcoming interview on The Weighing Machine podcast with Fidelity’s Dirk Hofschire, discussing their quarterly outlook and a white paper on global debt. A notable chart compares rolling 20-year returns between bonds and stocks, showing stocks outperforming bonds for long-term investors.
  • For more on interest rates, see a chart of 200 years of US interest rates.
  • This week’s guest on Orion’s The Weighing Machine podcast will be Simeon Hyman from ProShares, discussing Bitcoin and the ETF BITO.
  • The Weighing Machine Spotify Playlist has nearly 40 songs, including Radiohead's "I Might Be Wrong" from the new album release. Pitchfork’s review of Kid A-mnesia is recommended for music reviews.
  • A picture from the Chapel of Thanksgiving in Thanksgiving Square, Dallas, is shared.
  • For more resources, check out the Financial Advisor Success Hub. Feedback is welcomed at rusty@orion.com or ben.vaske@orion.com.

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/.