“All that we are is the result of what we have thought.”

~ Buddha

DON’T MISS our last REVIEW/PREP Call of the Year!

TRUVESTMENTS’ Year End Zoom Meeting

We will briefly review 2020 – Lord knows we have reviewed that enough LOL.

More important, we will set our thoughts onto 2021 and Beyond. Great things ahead – but patience, as always – will remain a critical friend along the way. Join us below – and feel free to pass the link along to anyone you feel could benefit from this process. All are welcome.

HERE IS THE IMPORTANT DATA:

Time: Dec 17, 2020 05:00 PM Eastern Time (US and Canada)

Join Zoom Meeting by clicking the link below:
https://us02web.zoom.us/j/86453033005?pwd=Qm1RSzJEd0EwZGtlV2d1QXpuQ2RGUT09

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Good Morning,

Do not be surprised if you find yourself feeling a little fuzzy as we head deeper into the Holiday Haze. Thankfully – it happens every year around this time. LOL

By the way – make sure you spend the hour with us noted above — we always enjoy making sure we are keeping you updated and aware – to stay on your path.

The data? Overall, it remains on a solid trajectory – upward. So much so that one gets that itch in their gut which suggests it is almost time for another monster. As hospital percentages fall and the vaccines take center stage, we must all recognize that the media will soon need a new “fix” to terrify us with as 2021 peers out into the darkness.

In a Perfect World?

As it relates to markets – I would suspect we get a general lift into year-end. Tax selling does not yet seem to be creating any real pressure oddly enough. One gets the sense we are like those astronauts a couple weeks back sitting on top of the Falcon 9 rocket a T-Minus 10:00 and counting.

With January staring us down I would simply make a few reminders, designed primarily to make sure you don’t become extremely worried when / if it unfolds.

January’s – after strong previous year finishes – often set the stage for early year profit-taking from those traders who work from week to week. The good news about this — if we can get it to unfold — would be that we then set the stage for the spring-coiling effect again as always covered on corrective waves.

Long-time readers have seen a lot of these things now. Good year end – somewhat positive few days of the New Year – and then it hits. The monster of the year. The media cannot exist without it after all – and social media would, well, implode without some series of memes about some terrible outcome going viral. Nutty.

Anyway, seeing some red ink in January also brings out all those old videos of how the year goes bad if January is down, etc etc. Those events dovetail right into the idea of burning off some of this elevated short-term trader sentiment. Money flows still do not portend any significant overheating – since we still have over $18 Trillion in the bank and a Fed who has made it certain: no rate hikes until things are going well for quite a long time.

Net-net : do not be surprised if we see some setbacks in January after a strong recovery year like this. Many are terrified just under the surface and it will only take a headline or two about some new monster..before the rush to the exits is triggered. It will be a good thing – not a bad one – for long-term investors. Recharging the spring-loaded forces already supporting us for years into the future – is good for you and yours.

Earnings Updates?

All about done for the Q3 data and they are already behind the 8-ball for Q4 data. Strangely, the next earnings season is a mere 6 weeks away. It will be here before you know it – so let’s get the latest from Refintiv:

  • There was no change this week to the positive S&P 500 EPS trends over the last 5-6 months.
  • With the mainstream media and others screaming for additional fiscal stimulus, the S&P 500 numbers are telling a different story.
  • The trends in S&P 500 earnings are saying “higher EPS is more probable than not”.

But let’s see a quick summary of the details:

  • The forward 4-quarter EPS value this week was $160.40 versus the $160.08 last week. (recall, this will roll upward by $8-10) when we roll into Q1 and look forward for the full 2021 data)
  • The PE ratio is 23x, a little high for an expected 4% average growth rate in S&P 500 earnings for both calendar 2020 and 2021 (hinting that the numbers are low).
  • The S&P 500 earnings yield is 4.34%, a six-week low from the high on 10/31 of 4.84%. This is still substantially higher than the 93 basis points for a 10-year bond.

Check these very productive – and forward-positive items:

  • The Q3 ’20 “bottom-up” S&P 500 quarterly estimate was just $32.91 on September 30th and has already moved up to $39.42 as of Friday, December 4th, 2020. A very substantial move indeed. And remember – analysts were short on expectations for over 90% of company reports!
  • The calendar 2020 S&P 500 estimate was just $125 on the mid-year read from June 30 ’20. Now – it is over $138.00 today – and climbing.

Something you won’t hear in the MSM? Note that what’s interesting about the 2020 calendar year S&P 500 EPS estimate shift is that almost precisely when the “extra” stimulus benefit ended in late July’20, the 2020 S&P 500 EPS estimate began to increase rapidly.

It is likely we will keep hearing mainstream media drive Armageddon stories screaming for additional fiscal stimulus. The good news? The S&P 500 numbers are telling a very different story.

S&P 500 Forward Earnings Curve

To show you how afraid analysts are to raise expectations – even as companies are beating and raising at ridiculously high rates, the 2021 S&P 500 estimates have been almost constant since mid-August ’20 at $165-$166 per share.

The bottom line: sell-side analysts are really afraid – which has always been a good thing for upside surprises. As we have shown, they missed very badly on Q2 and Q3 ’20 EPS and revenue estimates and yet – they still refuse to lift Q4 ’20 estimates at all.

I will say again – pray for some January fear-selling.

Corrections are set to be fewer and farther between as we move later into 2021 and beyond.

Simple to see? Yes.

Easy to trek that path? Ha ha – not on your life.

Building wealth over the long haul means following the current not the waves.

It means taking all the crap – and staying on your pathway through the good as well as perilous times.

Your emotions will not guide you through the storm. We all suffer those emotional weaknesses. Our job is to help clients not do battle with their greatest weaknesses. Don’t fret – we all have them. We just have to focus on this:

The underlying current of massive strength and benefit headed our way…

Give Thanks my friends…we will get through this because that is what we do.

√ The sun’s rays are just over the horizon.

√ While many will let fear and worry take them off their rightful rewarding pathway ahead, over the long haul, we can be confident that what is headed our way are our best decades.

In Summary

The Holiday Season is here. We always wish you and yours the best of the Season.

Don’t fret as 2021 ebbs ever closer. You can bet there will be more than enough monsters to keep us all busy as the New Year dawns. Like all the other ones before, we will vanquish them together.

We will all…stand tall in the storm – and look forward, above the noise – not back and into the fog-shrouded dust heap of the past.

This rocket-ship ride is just getting fueled up for the trip – even now in the midst of all of this…we are set for collective good years together like none in history – no matter the politics of it all.

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 future unfolds.

The media will do their best to knock you off your focus, grabbing at your fears, stabbing at the ghosts in the back of one’s mind and working to take you off your pathway.

Focus your mind on rising above this tension and angst instead – as we all succeed together…

It is set in stone with The Barbell Economy®…whether one buys into it – or not.

Pull your seatbelt tighter and hold on to your popcorn.

Exciting things are just ahead.

Enjoy Your Entire Holiday Season

Please Stay Safe & Healthy

We are here to help always, even if just to talk.

Until we see you again, may your journey be grand – and your legacy significant.