LIVE MARKETS What a year! Now what?
- The main US indices are winning, the Nasdaq is in the lead; the bank index jumps> 3%
- Energy tops the S&P 500 sector winners; weakest real estate group
- Euro STOXX 600 index gains ~ 0.4%
- Dollar, rise in crude; bitcoin gold dip
- 10 Year US Treasury Yield ~ 1.61%
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WHAT YEAR ! NOW WHAT? (1125 EST / 1625 GMT)
While some of the darker aspects of 2021 may make many of us look back with less affection, CFRA’s Sam Stovall note underscored some bright spots, at least for the U.S. stock market.
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The company’s chief investment strategist says 2021 ranks 12th best since WWII in price returns, while its third consecutive double-digit gain was only the fifth time there was so much or more consecutive double-digit increases, writes Stovall.
Since 1945, history shows that price returns, after annual increases of 20% or more, have averaged 10.4%, with gains occurring 80% of the time. In comparison, it points to an average gain of 9.3% with a frequency of 74% for an advance for all years.
As for all-time highs, the S&P 500 had 70 for 2021, 2.5 times the average since 1954 and the second-highest number since the 77 new highs recorded in 1995 and 1954 – the year the S&P recovered from the losses of 1929-1932. bear market.
In terms of volatility, 2021 hasn’t been that dramatic with 55 daily moves of 1% or more back and forth, just a little higher than the average of 51 since WWII.
But in terms of profits and revenue gains, 2021 is expected to be above average with estimated operating EPS growth for the fiscal year of 43.8% – the largest gain since 1988, when comparable records have started. And estimates for 14.5% revenue growth in 2021 would be the highest since 1974, writes Stovall.
However, the strategist signs with a note of caution:
With the S&P closing the year with an operating P / E of 23.2 – its 6th highest since 1988 – this “indicates an uncomfortable level of optimism compared to the average year-end P / E of 18. , 8 “.
2022 SUNTERS IN LIKE A LAMB: MARKIT, CONSTRUCTION EXPENDITURE (1056 EST / 1556 GMT)
The first trading day of the new year greeted investors with a low-key duo of economic reports.
Activity at US factories lost momentum in the last month of 2021, increasing at its lowest rate in a year.
Global financial reporting firm IHS Markit’s Purchasing Managers Index (PMI) final printout for December (USMPMF = ECI) confirmed a slight pullback to 57.7 – its advanced ‘flash’ catch released earlier in the month was 57.8 – marking a decline of 0.6 points from November.
A PMI number greater than 50 means increased activity compared to the previous month.
“December saw another moderate increase in manufacturing output in the United States as material shortages and supplier delays continued,” writes Sian Jones, senior economist at IHS Markit, who also found reasons for ‘to be happy.
“The end of the year brought signs that cost pressures have eased,” Jones adds. “The rise in input prices was the slowest in six months.”
As U.S. goods makers have faced a struggling supply chain even as consumer demand has shifted to services, they continue to weather the COVID storm at least as well as its global rivals , and much better than China.
The Institute for Supply Management (ISM) is due to release its factory PMI data on Tuesday, which analysts expect a slightly more bullish reading of 60.1.
The Markit and ISM PMIs differ in the weight they apply to various sub-components (employment, new orders, etc.).
The graph below shows to what extent the dueling PMIs agree (or disagree):
In a separate report, spending on construction projects in the United States (USTCNS = ECI) rose 0.4% in November, lower than the consensus of 0.6%. Read more
But this disappointment was mitigated by the Commerce Department revising its previous October reading upwards to 0.4% from 0.2%.
Once again, spending on residential projects – rising 0.9% as home builders scramble to meet booming demand – did the heavy lifting, offsetting a 0.2% drop. government spending on public works.
Wall Street is green in morning trading as investors greeted 2022 in a buying mood.
Even with strong early swings, the three major US stock indices are in positive territory, along with energy (.SPNY), small caps (.RUT), chips (.SOX), FANG (.NYFANG) and banks (.SPXBK) in the lead. wins.
Transports (.DJT) are in the red.
As yields rise, US stocks struggle to hold gains (1002 EST / 1502 GMT)
Major U.S. indices kicked the first trading day of 2022 higher as stock markets sought to extend the recovery from the pandemic shock into the new year.
However, an initial 0.6% surge in the S&P 500 (.SPX) ran out of steam about 10 minutes into the session. The SPX is now just above the dish on this day.
Meanwhile, the yield on the 10-year US Treasury is rising. The yield reached 1.60%, which puts it at a six-week high.
With the higher yields, the banks (.SPXBK) are particularly strong. However, the NYSE FANG + Index (.NYFANG) also manages to outperform that day. This with NYFANG member Tesla charged around 10% after record deliveries. Read more
The bond sectors are the most lagging behind.
Here’s where the markets are at the start of the first trading day of 2022:
WILL 2022 BE THE YEAR OF VALUE? (9:00 am EST / 1400 GMT)
At the end of 2021, the S&P 500 Growth Index (.IGX) outperformed the S&P 500 Value Index (.IVX) for five consecutive years:
Using data from Refinitiv up to 1995, which linked the period 2007-2011 for the longest period of growth exceeding value. However, over five rolling years, this recent streak has been more pronounced, with the IGX / IVX ratio increasing by 78% in 2021 compared to a gain of 36% in 2011.
Although the ratio increased last year, there was a sharp deceleration from 2020, which was the best year of growth on record relative to value. The ratio jumped about 34% in 2020, slightly exceeding a jump of about 33% in 2000. In 2021, it was up just over 7%.
And growth fell sharply from value at the end of 2021. In December, the ratio suffered its largest monthly percentage decline since February.
Meanwhile, the battle of growth versus value still seems to hinge on action in tech (.SPLRCT) versus finance (.SPSY). At the end of last year, technology accounted for around 56% of the weighting of the SPDR S&P 500 Growth ETF (SPYG.P). At 23%, financials were the biggest exposure for the SPDR Value ETF (SPYV.P).
After becoming parabolic, the S&P tech sector, on a monthly basis, peaked relative to the financial sector in August 2020. The tech / financial ratio then fell sharply:
Unless the August 2020 high in the tech-to-finance ratio is broken, the recent rally from the May 2021 low may still turn out to be a counter-trend rebound. If so, and tech resumes its decline relative to financials, 2022 may well be the year that growth ends its streak of annual wins over value.
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Terence Gabriel is a market analyst at Reuters. The opinions expressed are his
Our Standards: Thomson Reuters Trust Principles.