• Since the start of April, 87% of reporting companies have topped EPS forecasts, 75% have exceeded sales forecasts, 16% have raised guidance, and just 2% have lowered forecasts.  Overall, S&P 500 earnings growth is currently on pace to total 44% in the first quarter, which would be the best in a decade (source:  Bespoke Investment Group).  However, some investors are frustrated that many individual stocks didn’t respond to blow-out earnings (for example, most of the FANG+ stocks), but still the S&P 500 was up 5% for the month, a very solid showing.
  • There are comparisons being made between the 2020s and the Roaring 20s of last century.  The Spanish flu was followed by a decade that produced a 27.2% annualized real return.  Bulls think that Covid-19 will be followed by a long-lasting bull market.  But there are numerous reasons why the stock market of the 2020s will not be like the 1920s.  First, the 1910s was a terrible decade for the stock market (-4.9% annualized real returns) and so the 1920s had a low basis to build from.  In contrast, the 2010s was a high-performing decade, returning 15.3% annualized.  Second, this can also be seen with P/E ratios.  The P/E ratio at the start of the 1920s was 9.6x versus 20+ today.  Finally, the 1920s followed World War 1.  Economic booms typically follow major wars.  There was no equivalent war in the 2010s.




We love to read Barron’s semi-annual Big Money Poll of professional investors.  It tells us what the diverse group of money managers think about a myriad of topics.  The poll’s quite lengthy so what follows is only a summary:
Describe your investment outlook for U.S. equities in the next 12 months.
Bullish 67% (we are bullish)
Neutral 26%
Bearish 7%
Is the U.S. stock market overvalued, undervalued, or fairly valued at current levels?
Overvalued 38% (we think slightly overvalued)
Undervalued 5%
Fairly valued 57%
What is the biggest risk to the U.S. stock market in the next 12 months?
Rising interest rates 20%
Covid-19 resurgence/new variants 16%
Higher taxes 13%
Inflation 11%
Fiscal/monetary policy blunders 11%
Excessive stock valuations 7%
NOTE:  We place excessive stock valuations in the top three risks.
Which asset classes do you consider most attractive today?
Equities 64% (we agree)
Commodities 13%
Real estate 8%
Gold 5%
Cash 4%
Fixed income 3%
Crypto 3%
Which sector will perform best in the next 12 months?
Financials 22%
Tech 17%
Energy 15%
Which sector will perform worse in the next 12 months?
Utilities 34%
Tech 29%
Energy 10%
Finally, how concerned are you about the federal debt?
Extremely worried 36% (we agree)
Moderately concerned 54%
Not an issue 10%
We find it interesting that 67% are bullish, but only 5% think stocks are undervalued.  Our explanation for this is that we have the monetary and fiscal policies of a young, emerging bull market and an economy just coming out of a recession.  These early cycle characteristics outweigh the negatives of excessive optimism and high valuations normally seen in more mature bull markets.