Investment Commentary – November 9, 2021
Year to Date Market Indices as of November 9, 2021
• Dow 36,319 (18.00%)
• S&P 4,685 (22.89%)
• NASDAQ 15,886 (21.23%)
• Gold $1,834 (-3.34%)
• OIL $84.36 (74.256%)
• Barclay Bond Aggregate (-2.42%)
• Fed Funds Rate 0-0.25 (0-0.25)
• Annual Inflation Rate 5.4% (As of 10/13/21)
JPMorgan’s Dimon says supply chain hiccups will soon ease, points to extraordinary consumer demand
Global supply chain hiccups caused by the coronavirus have put a damper on economic growth, but the problem will be a fleeting one, according to JPMorgan Chase CEO Jamie Dimon.
“I should never do this, but I’ll make a forecast,” Dimon said Monday at a conference held by the Institute of International Finance. “This will not be an issue next year at all.”
Consumers are spending 20% more than they were before the pandemic, Dimon said.
Global supply chain hiccups caused by the coronavirus have put a damper on economic growth, but the problem will be a fleeting one, JPMorgan Chase CEO Jamie Dimon said Monday.
“I should never do this, but I’ll make a forecast,” Dimon said at a conference held by the Institute of International Finance. “This will not be an issue next year at all. This is the worst part of it. I think great market systems will adjust for it like companies have.”
The pandemic has laid bare how interconnected global supply systems are. For instance, a shortage of semiconductor chips has hampered manufacturers of cars and electronics. A dearth of willing workers has resulted in container ships idling at major ports and delays in shipping goods to retailers.
While some experts believe some pain will continue through 2023, Dimon has a rosier view. He said Monday that he believes the economy is set up for growth over the next few years. Part of that is because of the strength of the consumer, he said.
“Keep in mind, the consumer’s buying other stuff,” Dimon said. “They can’t buy cars, they’re buying home improvement; they can’t travel internationally, they travel domestically. The spend level is very high.”
“Because of the strength of the consumer, which is extraordinary, they’re spending 20% more than they were spending pre-Covid,” he added. “And companies are in great shape, they can continue to spend at these levels for a long time.”
The Stock Market ‘Melt-Up’ Keeps Going. A Unique Trend Is Emerging.
There is just no stopping the U.S. stock market.
The S&P 500 closed higher for the eighth consecutive day on Monday, its longest winning streak since April 2019. Plenty has been thrown at the market in that time, including the Federal Reserve’s tapering announcement and continued inflationary pressures, but nothing yet has halted the momentum. Even Tesla ’s 5% slump couldn’t ruin the party.
If the index makes it nine days, that would be the longest run since November 2004, Deutsche Bank analysts noted.
You have to go back to 1971 for the last time the S&P 500 has risen 17 out of 19 days. The technology-heavy Nasdaq Composite index is on an even better streak, enjoying 11 straight days of gains.
So are seeing a market melt up into the year-end?
Analysts at Susquehanna International Group noted a “unique trend” was emerging. Implied volatility levels have been moving higher, particularly when it comes to the Nasdaq, even as the index hits new highs. More significant, is the increase in upside volatility. In the options market, they see investors positioning for further upside, with “historically high” call skew priced in—particularly for large-cap tech stocks including Amazon , Alphabet , Facebook , Nvidia and PayPal . The skew is more moderate for the S&P 500.
In short, even though we are at all-time highs, investors are positioning for the good times to keep rolling. While that all points to the momentum continuing at least for now, it’s no guarantee things won’t eventually reverse.
News Around The web:
Five in a row: With earnings season nearly over, the S&P 500, the NASDAQ, and the Dow rose for the fifth consecutive week, and all three indexes pushed their record levels higher. The NASDAQ added about 3%, outperforming its peers by a wide margin for the second week in a row.
Small-cap surge: A benchmark of U.S. small-cap stocks, the Russell 2000 Index, outpaced its large-cap peers by a wide margin, adding more than 6% for the week and topping a record set nearly eight months earlier. Despite that big jump, the Russell 2000 slightly trailed a large-cap peer on a year-to-date basis.
Earnings surprises: With the earnings season now nearly completed, the proportion of S&P 500 companies that had beaten analysts’ net income expectations stood at 81% as of Friday, according to FactSet. That so-called beat rate ranks above the 76% five-year average.
Jobs comeback: U.S. jobs growth in October exceeded most economists’ expectations, and the addition of 531,000 jobs signaled a resurgence in the labor market following recent weakness. In addition, the government adjusted initial jobs growth estimates for August and September upward by a total of 235,000, and the unemployment rate fell to 4.6% from 4.8%.
Upcoming Economic Reports
Thursday: Veterans Day holiday, U.S. stock market open, bond market closed
Friday: Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics
https://www.marketwatch.com/ (Market Indices)
https://jasonzweig.com/this-day-in-financial-history/ (This day in Financial History)
https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)
https://finviz.com/groups.ashx (YTD Performance Chart)