Week after week, our TrackstarIQ data shows that the number one ticker search by institutional advisors is the S&P 500 SPY.
But what does it mean when those searches continue to increase?
Generally speaking, the more searches we see for a commonly traded ETF, we are either near a turning point or a key news event.
With the Fed and earnings hitting this week, we could have both.
Different data points offer a glimpse at what’s to come.
Here’s how you might categorize them.
Bearish
- Gold fell nearly 7% in less than a week.
- Oil dropped over 7% in a single day.
- Bonds have run back towards yields we last saw in January.
Bullish
- Copper soared by over 9%.
- Natural gas ran up over 13% in 10 days.
- IPOs jumped 232% in 2021 vs. 2020.
The problem is we could make the case that any of these is bullish or bearish.
For example, IPOs spiking could point to a top in the market. Or a run in gas and oil means consumers pay more at the pump and spend less elsewhere.
It’s hard to make sense of it all.
This is why we instead focus on the key themes we expect to ride through the remainder of this year.
Fed pullback
It’s inevitable that the Fed reduces their treasury purchases.
Initially, they used low rates to support debt markets and hopefully spurn investments.
Yet, instead of investing capital in projects and growth, corporations have bought back massive amounts of stock or issued dividends.
Lawmakers are beginning to take notice.
And that’s not a good sign.
On the whole, it is extremely likely that the Fed reduces its balance sheet starting this year.
In turn, that should send bonds lower and yields higher.
Global expansion
To date, the story has really been about the U.S. economic recovery.
Yet, the rest of the world is getting back to normal.
That doesn’t mean their equity markets are cheap by any stretch. Heck, the Norwegian markets (EWN) are nearly 42% higher than they’ve ever been.
But, markets like Italy (EWI) and Spain (EWS) lag far behind their Euro partners.
Labor issues
Before the pandemic, housing suffered from labor shortages.
Now it’s 20x worse.
The same thing goes for truck drivers.
Structural labor problems exist in many markets that don’t have immediate solutions.
That’s why investors are more likely to reward lean organizations that are able to generate growth without workforce expansion.
Tech companies fall into this category as marketing, research and development, and sales make up their largest initial expenses.
Our hot take
Use volatility to your advantage.
This isn’t a great market for picking stocks…yet.
Consider strategies where you remain fully invested in the markets. Then, as markets dip and values become more apparent, you can reweight your portfolios more towards individual equities.
Questions from your clients
- What industries benefit from higher interest rates?
- Is it possible that markets never go down?
- What alternative investments are there to equities and bonds?
- Are bonds safe?
Monday, July 26
- 10:00 a.m. – New home sales
- Earnings: IBM (IBM), JB Hunt (JBHT)
Tuesday, July 27
- 8:30 a.m. – June durable goods
- 9:00 a.m. – Case-Shiller home prices May
- 10:00 a.m. – July consumer confidence & Richmond Fed manufacturing index
- Fed Meeting starts
- Earnings: Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), 3M (MMM), Visa (V), Advanced Micro Devices (AMD), General Electric (GE), Starbucks (SBUX), UPS (UPS), Stanley Black and Decker (SWK), Cheesecake Factory (CAKE).
Wednesday, July 28
- 2:00 p.m. – Fed statement
- 2:30 p.m. – Fed Chairman Jerome Powell briefing
- Earnings: Boeing (BA), Facebook (FB), Pfizer (PFE), Ford (F), Qualcomm (QCOM), McDonald’s (MCD), Bristol-Myers Squibb (BMY), PayPal (PYPL),
Thursday, July 29
- 8:30 a.m. – Personal consumption expenditure (PCE) for June
- 8:30 a.m. – Employment cost index Q2
- 9:45 a.m. – Chicago PMI July
- 10:00 a.m. – Consumer sentiment July
- Earnings: Amazon (AMZN), Merck (MRK), Comcast (CMCSA), MasterCard (MA) Hilton Worldwide (HLT), Altria (MO), Hershey (HSY), Yum Brands (YUM), Gilead Sciences (GILD), Pinterest (PINS), First Solar (FSLR), Beazer Homes (BZH), U.S. Steel (X), Molson Coors Brewing (TAP), Valero Energy (VLO).
Friday, July 30
- 8:30 AM – Markit manufacturing & services PMI for July
- Earnings: Caterpillar (CAT), Chevron (CVX), ExxonMobil (XOM), Procter & Gamble (PG), Colgate-Palmolive (CL), AbbVie (ABBV), Church & Dwight (CHD), Johnson Controls (b), Cabot Oil & Gas (COG).