Report (Premium Edition) 11-1-2021

Tip: Use this as a quick guide on the short-term direction (1-2 weeks) of key markets. It is not a signal to buy or sell, just to show the trend. This is a quick cheat sheet to know the trend and help understand what is happening with the markets in the short term. I started making this section years ago because once had a client that would call me nearly every day asking the direction of the markets.

S&P 5004605.390.20%8.984608.084567.59Bull
Crude (WTI)83.8680.70%0.58484.17282.733Bull
10 Year158.20%1.61%0.0251.5931.554Bull
US Dollar Index94.073−0.06%−0.06194.30994.07Bull

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have outperformed others like utilities. This is also a way to narrow the sectors to find investment opportunities.

Sector Name5-Day Return1-Month Return3-Month ReturnYTD ReturnYTD Return vs S&P 5003-Year Return5-Year ReturnTrend
 Basic Materials0.20%5.70%1.90%19.80%-4.00%73.80%95.90%Bull
 Communication Services0.20%0.50%-2.40%18.60%-5.20%87.10%70.60%Strong Bull
 Consumer Cyclical3.20%7.40%5.80%23.90%0.10%125.10%197.40%Bull
 Consumer Defensive0.10%1.80%0.80%8.60%-15.20%42.30%55.80%Bull
 Financial Services-0.80%6.00%10.40%38.80%15.00%67.60%120.30%Bull
 Healthcare1.50%3.50%1.20%16.60%-7.20%64.90%124.60%Strong Bull
 Real Estate0.00%5.40%3.40%30.90%7.10%55.30%66.10%Bull

Key Drivers for the Week of Nov. 1st, 2021

TIP – This is a 1-minute brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.

  • Focus on monetary policy meetings from FOMC
  • Unemployment Rate
  • Inflation, Hyperinflation & Stagflation fears
  • Supply chain issues continue getting worse

Key Events For 11/01/2021

  • Monday – ISM Manufacturing for October (10 a.m.)
  • Tuesday – BoJ Minutes
  • Tuesday – Markit Eurozone Final Manufacturing PMI for October (5 a.m.)
  • Tuesday – American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)
  • Wednesday – MBA Mortgage Applications (7 a.m.)
  • Wednesday – ADP Employment Survey for October (8:15 a.m.)
  • Wednesday – Final Core Capital Goods Orders Growth for September (10 a.m.)
  • Wednesday – Fed Policy Announcement (2 p.m.)
  • Wednesday – Fed’s Powell Speaks (2:30 p.m.)
  • Thursday – OPEC+ Production Meeting
  • Friday – Unemployment Rate for October (8:30 a.m.)
  • Friday – Baker Hughes Rig Count Data (1 p.m.)
  • Friday – Consumer Credit for September (3 p.m.)

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated monthly to help provide our readers with timely insights. Readers should do their own research before making any investment. In order to make our report easier to read, we are now including the stocks as lists for readers in separate posts.

  • Inflation Stock Picks: List of stocks that we think should perform better in a rising inflation environment. Click here
  • Auto Parts Stock Picks: Auto parts companies are likely to see their stocks rise as the average age of cars and light trucks increased from 11.9 years in January 2017 to 12.2 years in January 2021, according to new data from IHS Markit. Below are the top auto parts companies that investors should buy now before the profits roll in. Click here.
  • Solid Picks: This group of stock/ETF picks is likely to experience growth and perform well into the near future. Click here.
  • Dividend Stocks: List of stocks that have excellent dividends and business performance. Click here.
  • Dividend Growth Stocks: List of stocks that have a history of growing dividends. Click here.
  • Dividend ETFs Picks: This list of ETFs is selected for their ability to pay dividends. Click here.
  • Dogs of the Dow: This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used the price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. Click here.

Week Ahead: FOMC & Market Data

The US indexes have set new records. The Nasdaq 100 had a weekly performance of 0.5%, while the Dow Jones was 1.1%. The S&P 500 rose 1.3%.

Asia has been against the tide for the past week. The Hang Seng lost 2.7% in the last five sessions. The Shanghai Composite lost 0.5%. Meanwhile, the Nikkei gained 0.3%.

Europe is still experiencing volatility. The CAC40 saw a 1.7% gain, while the Dax rose 1.8% and Footsie gained 1.2%. Italy rose 0.6% and Spain 1.2% in the euro zone’s peripheral countries, while Portugal held steady at 2.7% after its recent strong growth.

Wall Street has set a series of historic records thanks to the ECB’s continuing accommodating monetary policy and the overall positive results of major groups from both sides of the Atlantic. There were a few drops on Friday as the latest outlook seems to be less optimistic. The Fed’s decision on next week’s interest rate could cause volatility, so it is vital to be cautious.

Rising inflation will continue to be a concern for businesses. Last week, Twitter co-founder Jack Dorsey warned that “Hyperinflation is going to change everything. It’s happening.” These comments come with growing concern that inflation could be much worse than policymakers anticipate as the consumer price index nears a 30 year high. Federal Reserve Chairman Jerome Powell said last Friday that inflation pressures “are likely to last longer than previously expected.” 

Dorsey is not just the CEO of Twitter, but also of payment processing giant Square. Dorsey has access to a plethora of financial data, including insight into the economic outlook for everyday Americans. Although his comments on hyperinflation have drawn criticism from individuals including Cathie Wood and David Rosenberg, who have dismissed his concern as “totally ridiculous,” Dorsey is both a billionaire and a Big Tech elite. His remarks should not be taken lightly, especially as a hyperinflationary scenario is not impossible.

It is unclear from the statistics if the global economy will slow down or accelerate. The US durable goods orders numbers for September were strong, while Q3 growth was weak. The German Ifo index of business confidence in October was disappointing, as was German Q3 growth. However, France and Italy’s GDPs were positive. The central banks are also caught up in the middle of all this. For example, the ECB admitted this week that they were a bit optimistic about inflation. For now, the leitmotif is to remove the anti-pandemic support systems without causing too much economic activity. What happens if the prices keep falling off the rails.

The foreign exchange market has seen little volatility, though the euro has seen some strength against the greenback. After falling below USD 1.16 base the previous week, it is now trading at USD 1.1650. The EUR/CHF rate is CHF 1.06152, while the Cable rate is USD 1.37866 per GBP.

The sovereign debt market, which is still at the heart of the game due to questions about the economic context and the adequacy of monetary policies, moved the lines during the week. The United States is not the exception. US debt has fallen slightly from the previous week to 1.60% over ten years. The European Central Bank’s less relaxed inflation policy has led to an increase in the cost of all debt, with some violent moves on Friday for the most vulnerable economies. The Bund rose by -0.09% (+5 point) and the OAT by 0.28% (+7 point).

The Italian debt rose to 1.20% (+15 points) and the OAT to 0.28% (+7 points). The movement at -0.07% (+8 point) has taken away the Swiss signature. The market waits to see if and when the ECB will create a new repurchase program to replace the PEPP. It likely will. It might be necessary to avoid any turmoil surrounding the debt of certain eurozone countries, notably Greece, responsible for the rise in the country’s borrowing rates.

Next week’s major macroeconomic news will almost entirely be American. There will be the ISM manufacturing and services indexes, but most importantly, the Fed’s regular meeting on Wednesday, November 3. This will give an overview of the Fed’s monetary policy and how it fits in with the economy. This will be a crucial moment for asset purchase programs and visibility on the development of key rates.

Equity markets

Takeover bids are back.

France’s CNP Assurances saga has come to an end. The final stage of the capital reorganization will see the end of the CNP Assurances saga. La Banque Postale will purchase the majority shares of BPCE. It will also offer EUR 21.90 to minority shareholders for shares that are still in their hands. Before the announcement, the share price hovered around EUR 15. The star performer in Switzerland this week is Temenos, a banking software specialist. It rose 15% due to rumors of private equity interest. According to reports, the aptly-named Swedish EQT and American Thoma Bravo are looking into a buyout. However, nothing has been confirmed.

Facebook seeks refuge in the metaverse

Facebook is fighting back against all attacks. Mark Zuckerberg announced that his group would be renamed “Meta” to end the offensive in the “metaverse” and to ensure equal access to all of the company’s platforms: Instagram, WhatsApp, and Facebook.

Apple and Amazon tone down

The Q3 reporting season saw two American giants rank among the worst performers. Apple was hit hard by shortages, and Amazon experienced cost inflation as a result of US recruitment problems. Alphabet and Microsoft, however, are less dependent upon products and have shined: it is not surprising that these stocks showed the most significant progress among the tech giants this past year.

Top / Bottom: Worldline vs Anheuser-Busch Inbev

After a strong week, AB Inbev, a Belgian brewer, gained over 10%. The group’s top-of-the-range beers are enjoying the pre-pandemic levels. Worldline, a French payment specialist, saw it’s market capitalization drop by 25% after it announced slightly disappointing results and produced less ambitious medium-term predictions than expected.

It’s a matter of great money

Two companies have been reconstituted or consecrated by the latest earnings reports. Microsoft, the quiet force has taken over Apple’s position as Wall Street’s largest market capitalization. Although this is not the first, it shows the differences in the quality and results of these two companies. Tesla also joined the elite club of companies that exceed $1,000 billion in weight, thanks to two positive signals: Hertz’s huge order for its rental fleet, and Tesla’s record-breaking sales of the Model 3 in Europe.

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