“When you look at the dark side, careful you must be. For the dark side looks back.”–Yoda

Good Afternoon,

I have found over my years of serving in this profession that one can always look back at difficult time periods, windows of stress, angst and disorder – and find that hidden blessings were unfolding. Incredible opportunity was being birthed. Elements designed to bury us were overlooking that the process was indeed better seen as seeds being planted for future growth.

Sure, this can often feel very difficult – sometimes impossible to see in the midst of the storms, unrest and perceived darkness. That, my friends is why so few are able to stay strong, stay focused and stay patient, remaining on their proper pathway toward their life goals.

It is simply too easy to assume that investing and building wealth is supposed to be simple. In fact – in stark contrast – it is the difficulty that creates the future return. Once this reality is embraced – the “feeling” and stress caused by periods like we are living through now – become more exciting and drive anticipation instead of dread.

Alas, the history of America is what can provide the solid foundation one needs to peer into the dreams of the future – and see beyond the short-term reckless behaviors and vitriol.

It is not a choice. It is a requirement if one wants to keep climbing the mountain.

So Here We Are

The hour is upon us. The chatter has been spent – the energy has been disbursed. The final camera shots of massive flags waving in the breeze as the campaign closes during the early hours this morning. Now – we wait.

And while we wait – there is good news brewing. Each elements below is highlighted to remind us all that markets focus on “what’s next” – while humans tend to be side-tracked and consumed by “what’s now.” It is the learning how to jump from the latter to the former which puts us on the right track for the long haul.

…read ’em and reap:

It would be easy to overlook just how quickly the manufacturing base of America is recovering. The media will want you to focus on our flaws. I suggest long-term investors focus on the budding roses in the garden – not the thorns.

The ISM and PMI data above are both solid, improving, beating expectations and suggesting 2021 is set to be surprisingly strong.

There’s More…

In case you don’t see the footsteps in the sand, notice there is a reason we are running out of homes to sell. Think of it this way – over the next decade roughly 50MM kids will leave their homes and look for their own – to begin building their own life.

Just like the Boomers arrived in the early 80s, this wave of people will not stop.

Why is that tidbit important?

Simple – supply is down to record lows — easily explaining the record positive sentiment from builders (snapshot below in red). The better news? They have a whole lot of building to do – to catch up – at least for the next decade.

Underestimate the value of this Calafia data above at your peril.

Oh yes –and pray for a correction.

Earnings Season?

It continues to steamroll expectations. Analysts are more behind now than they were coming out of the GFC in March 2009 – and that only took them 10 years to catch up.

Beat rates and guidance raises are both shattering records. By the way friends – that is good news – no matter how you slice it:

How does that look compared to history?

…excellent for long-term investors:

Just so you have some of the latest specifics, the stats are impressive – and this is before we got the last 24-hours of more beats and raises:

  1. The forward 4-qtr estimate this week rose to $158.32 from last week’s $157.10. Remember – once Q4 data rolls over at year-end and you have a full 2021 look forward, these numbers are set to be in excess of $168.00.
  2. While the current forward PE fell to 20.6x last week, the 2021 data show a P/E of closer to 19.
  3. In a world of 87 basis point 10-year bonds, the opportunity spread is incredible.
  4. Note: when looking atS&P 500revenue data, there is (so far) an 80% “upside surprise” (or beat rate, per Refinitiv data) for theS&P 500 components that have reported 3rd quarter 2020 revenue (about 60% of the index).
  5. Everyone is always focused on EPS strength (or lack thereof), but revenue strength and revenue upside is even better for the long run.

In Summary

The Grim Reaper will keep coming. Don’t fret…instead – bring it on.

When he knocks on the door of your mind and stokes your fears — laugh at him and look forward – not back.

This rocket-ship ride is just getting loaded up for the trip.

Long-term investors have learned that when all of the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message:

…surprises to the upside.

It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.

Sure, more choppy waters are likely as the earnings season unfolds ahead. Oh – and we have that election thing too.

The media will do their best to knock you off your focus, grabbing at your fears and taking you off your pathway. Most especially with the hatred they have collectively dialed up as we head into the most-covered election ever.

Focus your mind on rising above this tension and angst.

Pull your seatbelt tighter and hold on to your popcorn.

Exciting things are dead ahead.