Taxing Week: Churnings & Earnings
Economic recovery was overlooked because of continued concerns over higher trending corporate and individual tax rates led by the Democrat-controlled federal government. Therefore, these helped the S&P 500 churn for another week as it sits almost exactly where it did on Tax Day, April 15. The S&P 500 was flat on the week, after backing off more marginal new ATHs. Energy, Communication Services and Banks Sectors led the week up, but Technology slipped 2.1%.
Economic recovery
Contrary to the alarmist — and flat out wrong — calls last November by many economists and sell-side strategists for “double-dip” recession, the U.S. economy expanded by 6.4% in Q1 2021. (This “margin of error” is why these individuals do not manage money for a living.)
Pent-up demand will help economic recovery
For Oak Harvest’s views on a “V-recovery,” on pent-up demand and a “Roaring 20s,” please see the following links:
While it took the economy 3½ years to recover after the 2008–09 financial crisis, it has taken less than a year this time — with the help of an aggressive Federal Reserve.
Economic recovery and momentum
Looking ahead, we continue to see strong momentum in the economy and stock markets through the rest of the year and into 2022 as the economy more fully reopens, and demand for the service economy grows. Post Q1 2022, there is increasing risk to an inflation scare as the “pay to stay at home” policies of the current administration are beginning to drive up hourly wages in lower-paying service sectors. The pandemic hit these sectors the hardest. And now they are trying to rehire workers to meet surging demand. Stay tuned for 2022 on that dynamic.
Stock market near-term in economic recovery
Earnings season has peeked and will subside over the next two weeks, and we will enter the “dead zone” of Q2, after May 21. So far in Q1, 68% of S&P 500 companies reporting earnings have beat estimates by more than one standard deviation, much higher than the 46% historical average. However, beats have only been rewarded by a median 26 bps of outperformance, versus 103 bps historically. The market is already focusing on the second half of 2021 as we move towards economic recovery and normalization.
Bitcoin
Two weeks ago, several highly respected CIOs (primarily bond managers) were pontificating on how Bitcoin was heading to a “crash” back to the $20,000–$25,000 level. I totally disagreed with this call, and as a short-term update, this morning Bitcoin is trading at almost $59,000. Please be aware that Oak Harvest does not buy or sell Bitcoin or other cryptocurrencies. Nor do we offer advice related to their buying or selling.
Stock Market H2 2021
OHFG continues to expect a very strong second half of the year, and we continue to monitor the markets for opportunities as we continue to invest on behalf of our clients.
Resources
Last Fridays Podcast: A “Taxing Week”, New ATHs, and H2 2021 Good News:
Interesting Reading:
- https://www.cnbc.com/2021/05/01/berkshire-hathaway-meeting-live-updates.html
- https://www.wsj.com/articles/from-apple-to-dominos-pizza-u-s-companies-scramble-to-meet-surge-in-demand-11619958601
- https://www.wsj.com/articles/americans-cant-get-enough-of-the-stock-market-11619947800
Markets: Cumulative Total Returns, Week Ending 4/30/2021
Weekly market updates contain general information and express the views of Oak Harvest Investment Services. Oak Harvest believes that all data, articles, and information cited are reliable at the time of creation. However, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.
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Nothing in this content constitutes personalized investment advice. Additionally, all charts, indicators, or graphs included or referenced in this content have limitations. Therefore, no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Also, strategies and ideas discussed may not be right for you. And views and opinions expressed may change without notice.
Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Also, Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections were, nor future forecasts and projections may be, as accurate as those discussed.
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