An Eye on Bull Market Surprises (FEB 22, 2021)

ataiger

With February now almost over, things are really looking up. First, fourth quarter earnings proved to be terrific for most companies. With 419 companies in the S&P 500 reporting so far, earnings per share have come in 18% higher than the consensus estimate. Sales have been just 3% higher on average, suggesting our operating leverage theme is really playing out. More specifically, unemployment remains high, but the government support to help out means many companies have not seen a precipitous fall in revenue. Instead, fourth quarter sales actually grew 1% year over year. When combined with a lower unemployment cost and other operating expenses, profit margins have moved to near all-time highs. In short, the recession is over for corporate profits.
Second, after a slow start, the vaccination process has picked up nicely. In addition, there is some evidence that the first shot of the vaccine could provide 75% effectiveness against symptoms of any kind. Meanwhile, new cases are falling more rapidly than expected, and several leading health experts are even saying we may achieve herd immunity as early as April. This is a big change from just a few weeks ago.
Finally, Congress is working on another fiscal stimulus to support the economy until we are finally rid of this disease. Latest talks suggest this bill could be as big as $1.5 trillion, which is 50% greater than the one passed at the end of last year when COVID cases and hospitalizations were raging towards all-time highs.
It should be no surprise that equity markets have continued to do well under these circumstances and recent developments. In fact, markets have barely exhibited any two-way risk this year outside of a brief sell off at the end of last month, as several hedge funds were forced to reduce leverage.
At this point, it seems like nothing can slow this bull market. However, that's exactly when surprises usually arise. We see two potential risks to be thinking about as we exit February. First, is the risk associated with interest rates rising sharply as bond markets simply catch up to what other asset prices are already reflecting. Such a rise would put pressure on some of the most richly priced stocks that have done so well. Second is the risk that some of the positive operating leverage that we've been witnessing in company earnings reports starts to go in reverse. Supply for many key economic inputs has been destroyed over the past year, and in some cases permanently. This is already starting to cause some problems for certain supply chains.
Bottom line, the combination of higher interest rates and peaking earnings revisions could prove to be difficult for the markets to handle in the short term. Such a correction, if it were to arise, would be welcome at this point, as sentiment and positioning have reached extreme levels.
With this macro backdrop, we continue to favor areas in the market that are reasonably priced or can benefit from rising rates and inflation. Areas like banks, materials and energy. We also favor reopening beneficiaries in the consumer and business services sectors, as markets begin to digest a faster return to normal activities.


(下面是google 机器翻译的)

随着2月即将结束，事情真的开始好转了。首先，事实证明，对于大多数公司而言，第四季度的收益都非常可观。到目前为止，标准普尔500指数中有419家公司报告，每股收益比市场普遍预期高出18％。销售额平均仅增长了3％，这表明我们的经营杠杆主题确实正在发挥作用。更具体地说，失业率居高不下，但是政府提供的帮助意味着许多公司的收入并未出现急剧下降。相反，第四季度的销售额实际上同比增长了1％。再加上较低的失业成本和其他运营支出，利润率已接近历史最高水平。简而言之，衰退已经结束，企业获利了。
其次，在缓慢启动之后，疫苗接种过程进展顺利。此外，有一些证据表明，该疫苗的第一剂可以提供75％的抗击任何症状的功效。同时，新病例的下降速度比预期的要快，几位领先的健康专家甚至说我们最早可能在4月实现牛群免疫。与几周前相比，这是一个很大的变化。
最终，国会正在研究另一种财政刺激措施以支持经济，直到我们最终摆脱这种疾病为止。最新的谈话显示，该法案可能高达1.5万亿美元，比去年年底通过的COVID病例和住院治疗正逼近历史最高水平时高出50％。
在这种情况下和最近的事态发展下，股票市场继续保持良好表现也就不足为奇了。实际上，除了一些对冲基金被迫降低杠杆作用之外，在上个月底短暂抛售之外，今年市场几乎没有表现出任何双向风险。
在这一点上，似乎没有任何事情可以减缓这一牛市。但是，这恰恰是通常会带来惊喜的时候。我们认为，在2月退出时，有两个潜在的风险正在考虑中。首先，随着债券市场赶上其他资产价格已经反映的利率，与利率急剧上升相关的风险是否存在。这样的上涨将对表现出色的一些最昂贵的股票施加压力。其次是我们在公司收益报告中已经看到的一些积极的经营杠杆开始倒转的风险。在过去的一年中，许多关键经济投入的供应被破坏，在某些情况下被永久破坏。对于某些供应链，这已经开始引起一些问题。
归根结底，较高的利率和最高的收益修正率的组合可能证明市场短期内难以应对。由于情绪和立场已达到极端水平，因此在这一点上，如果出现这种纠正，将是受欢迎的。
在这种宏观背景下，我们继续偏爱价格合理或可以从利率上升和通货膨胀中受益的市场区域。银行，材料和能源等领域。随着市场开始消化更快地恢复正常活动的机会，我们也赞成在消费者和商业服务领域重新开放受益人。

ataiger

mike wilson

peppapig