Corporations\nhave been posting very strong Q3 2021 earnings numbers. With over 90% of\nS&P 500 companies reporting, earnings are up 43.1% from the same period\nlast year, on +18.6% higher revenues. Almost 80% of companies beat their\nearnings-per-share estimates. All told, earnings for the S&P 500 have\nreached a new all-time quarterly record, surpassing a record set the previous\nquarter. Estimates for 2022 earnings have moved higher all year.<\/p>\n\n\n\n
And yet no\none seems to be happy with the economy. There are only problems, issues, and\ncrises, with barely any stories covering record sales, rising wages, abundant\njobs, and incredible demand. Some of the biggest U.S. retailers, including\nTarget and Walmart, have reported being fully stocked for the holiday shopping\nseason, but all we hear about are supposedly empty shelves.1<\/sup><\/p>\n\n\n\n I\u2019m not\nsaying the economy is humming nicely and there are no issues to speak of. But I\ndo think there is a fairly wide \u2013 and seemingly growing \u2013 disconnect between\npeople\u2019s perception of the economy versus the actual fundamentals of the\neconomy. Many investors and the media see the economy in bad shape and getting\nworse, which makes me even more bullish. The wall of worry is growing, and\nstocks love to climb it. <\/p>\n\n\n\n __________________________________________________________________________<\/p>\n\n\n\n See Why I am Bullish with Our Just-Released Stock Market Report!<\/a><\/strong><\/p>\n\n\n\n Investors often let the media and overblown concerns\npressure them into making immediate financial decisions. The key for your\nlong-term investment is research \u2013 instead of panicking in times like these,\nremember to not time the market! Now is the time to focus on data that can help\nyour financial future. <\/p>\n\n\n\n To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 __________________________________________________________________________<\/p>\n\n\n\n I see three\nmain narratives driving the wall of worry today. Assuming these concerns\npersist\u2014which I believe they likely will\u2014my bullishness is likely to persist,\ntoo.<\/p>\n\n\n\n Worry #1: Supply\nChain Problems Will Crush Holiday Sales <\/strong><\/p>\n\n\n\n Many folks are worried that supply chain issues are going to\ncreate a lack of goods and services this holiday season. Supply just hasn\u2019t\nbeen able to keep up with demand, and it seems all but certain consumers will\nencounter an \u201cout of stock\u201d sign at some point in the next several weeks.<\/p>\n\n\n\n But that does not necessarily translate to depressed holiday\nsales. In fact, there are signs consumers are buying goods early, perhaps to get\nsupplies while they last. October retail sales report showed U.S. consumers out\nspending in droves, with sales to retail stores, online sellers, and\nrestaurants rising by 1.7% month-over-month, according to the Commerce\nDepartment. Sales in most categories are back above pre-pandemic levels. Some\nof the biggest U.S. retailers, including Walmart, Target, and Home Depot all reported\nbetter-than-expected Q3 earnings and also reported that shelves are stocked in\nanticipation of the holiday shopping season. While there are certainly\nshortages and tight inventories in some parts of the economy, there is a\nreasonable counter-argument that a perceived lack of goods and services may be\nslightly overblown. If the worries and concerns over the supply of goods are\ngreater than the actual scope of the problem, that\u2019s potentially bullish for\nstocks, in our view.3<\/sup><\/p>\n\n\n\n Worry #2: Inflation\nis Going to Hurt Consumers and Choke-Off Growth <\/strong><\/p>\n\n\n\n In October, the Consumer Price Index (CPI) measure of\ninflation reached a 30-year high, posting a 6.2% year-over-year increase and\nfollowing five straight months where inflation has topped 5%. Fears of high\ninflation hurting consumers and killing growth have flooded the airwaves.<\/p>\n\n\n\n Again, my point here is not that inflation is benign and there\nis nothing to worry about. What I\u2019m focused on is whether the fear of higher\ninflation might be bigger than the actual risk of higher inflation. If fear\noutweighs risk, and inflation is even modestly better than most expect, that\ncan be good for stocks.<\/p>\n\n\n\n Permanent, nefarious inflation happens when there is too\nmuch money chasing too few goods, which I\u2019m sure has many readers are saying: that\u2019s\nwhat we have now! <\/em>The difference, however, is that the U.S. and global\neconomy have the capacity to build-out supply, it is just currently trailing\nthe demand surge in the economy. Bringing supply online takes much longer than\nbringing demand back, as businesses ramp production and navigate supply chains.\n\u201cToo few goods\u201d is fixable, in other words, and I think in a few months\u2019 time\nmore supply will ease inflation.4<\/sup><\/p>\n\n\n\n Worry #3: Another\nDebt Ceiling Showdown to Ruin Christmas<\/strong><\/p>\n\n\n\n Treasury Secretary, Janet Yellen, recently penned (another)\nletter to Congress, in which she wrote \u201cthere are scenarios in which Treasury\nwould be left with insufficient remaining resources to continue to finance the\noperations of the U.S. government beyond [December 15].\u201d She added that \u201cto\nensure the full faith and credit of the United States, Congress must raise or\nsuspend the debt limit as soon as possible.\u201d<\/p>\n\n\n\n This issue is not currently being discussed much in the\nmedia, but I would slate it as a \u201ccoming soon\u201d brick in the wall of worry. The\ndebt ceiling has become a political flashpoint, and there is little doubt a\nshowdown around the holidays would make for a gripping story. I expect it to\nreturn to the headlines in December, driving additional worry about its impact\non the markets and the economy. <\/p>\n\n\n\n The narratives are sure to focus around the U.S.\n\u201cdefaulting\u201d on debt, which has been a mischaracterization in the past and will\nbe in the future, in my view. At the end of the day, the U.S. Treasury does not\nneed Congress\u2019s authorization (or Congress-approved funding) to make interest\npayments on debt\u2014it has ample tax revenues to cover them\u2014nor does it need\nCongressional approval to issue new debt to refinance a maturing bond. The\nimplication that failure to raise the debt ceiling would trigger a credit event\nis off-base, and markets know it.5<\/sup> <\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n The economy is far from perfect, but demand is strong, the\njobs market is wide open, and corporations are posting a record profit. Yet few\npeople are happy. Instead, widespread concern and worry over supply chains,\ninflation, labor shortages, and coming soon, the debt ceiling, are prevailing.\nThat makes me even more bullish. The reason is simple: when everyone is fixated\non an issue and it becomes widely discussed, its pricing power concurrently\nfalls. This is how \u201cwalls of worry\u201d get built, and stocks love to climb them.<\/p>\n\n\n\n
IT\u2019S FREE.\u00a0<\/strong>Download the Just-Released December 2021 Stock Market Outlook<\/strong><\/a>2<\/strong><\/a><\/sup><\/p>\n\n\n\n