What\u2019s\nmore, 79.7% represents an above-average proportion of companies beating\nconsensus estimates, and guidance has been positive as well. This favorable\nguidance has been helping push estimates for the current and coming quarters\nhigher \u2013 all good signs. Full-year 2021 earnings for the S&P 500 are\nexpected to be up 28.1% relative to 2020 estimates. In short, earnings season\nhas been very supportive of the \u2018economic resurgence\u2019 narrative, and for me it\nis certainly a bullish driver.1<\/sup><\/p>\n\n\n\n __________________________________________________________________________<\/p>\n\n\n\n Focus on the Fundamentals Instead of Timing the Market!<\/a><\/strong><\/p>\n\n\n\n There are currently many positives in the market, but there\nare still reasons to be cautious in your decision-making process. Factors, such\nas, interest rates, investor optimism, and over-supply, could shift the market\nat any time. So, instead of focusing on short-term choices, I recommend\nsticking to the fundamentals and maintaining a diversified portfolio. <\/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 Then\nthere are the monetary and fiscal policy drivers, which remain in full\naccommodative mode. The Federal Reserve used its January meeting to assure\ninvestors they will remain in support mode until the labor market shows\nsignificant improvement, which is likely to take at least this year but\nprobably longer. The fed funds rate will not move in 2021, and the bond\npurchase program won\u2019t be tapered without ample warning, in my view. <\/p>\n\n\n\n On the\nfiscal side, the House of Representatives has already passed a version of the\n$1.9 trillion American Rescue Plan, which includes another $1,400 in direct\nstimulus payments, an additional $1,000 child tax credit, and an extension of unemployment\nbenefits to August 29. The sheer size of the bill and the inclusion of direct\ntransfer payments only add to the already massive amounts of liquidity sloshing\naround in the capital markets.3<\/sup><\/p>\n\n\n\n What\nmakes me cautious? I\u2019ll focus on three areas: interest rates, too much investor\noptimism, and over-supply. <\/p>\n\n\n\n Start\nwith interest rates. One of the reasons the stock market has been comfortable\ntrading at such a high multiple, in my view, is the understanding that interest\nrates would remain \u201clower for longer.\u201d We know the Federal Reserve is likely to\nkeep short rates anchored to the zero bound, but longer-dated US Treasuries\nhave been marching steadily higher over the last year (see chart below). I\u2019ve\nwritten before that as interest rates go up, the \u201crisk premium\u201d \u2013 which is the\nspread between the risk-free rate on Treasuries and the yield on the S&P\n500 \u2013 shrinks. A narrowing risk premium could mean trouble for high valuation\nstocks, in my view.<\/p>\n\n\n\n The 10-Year and 30-Year U.S. Treasury\nBond Yields: On the Rise<\/strong><\/p>\n\n\n\n The next cause for caution is investor optimism, or\nspecifically, too much of it. Most readers are aware of the retail trading\nmania going on, with get-rich-quick storylines popping up every day (mostly on\nthe internet). It\u2019s also true that individual investors opened more than 10\nmillion new brokerage accounts in 2020, which was a record, and margin balances\nhave been steadily rising. Too much optimism is usually bad news for stocks,\nand I\u2019m cautious in 2021 about investor sentiment creeping towards euphoria. <\/p>\n\n\n\n Finally, there\u2019s the over-supply issue. The number of\npublicly-traded companies is on the rise after a 20+ year slump. From 1997 to\n2017, the number of listed companies dropped from 8,500 to 4,500, spurred by\nthe tech bubble bursting. The tide has been shifting. After modest upticks in\n2018 and 2019, the number of listed companies surged by 200 in 2020, and\ninvestors expect 2021 to post even bigger increases. \u201cSPACs\u201d are all the rage\non Wall Street, as an increasing number of (often risky) start-ups seem eager\nto raise capital and eschew the regulatory requirements associated with IPOs.\nWhen companies are clamoring to issue shares in a hot market, I think that\u2019s\ngenerally a foreboding trend. <\/p>\n\n\n\n Bottom Line for Investors<\/strong><\/p>\n\n\n\n There\u2019s\nalways a push and pull of positive and negative factors to weigh when investing\nin equities. When I look out at 2021, I see quite a few of both, which to me\nmeans the second half of this year could be quite volatile. Even still, I\nremain confident the economic surge on the other side of this pandemic will be\neven better than expected, and I think the positive forces in the economy and\nmarkets will far outweigh the negative forces. <\/p>\n\n\n\n Preparing for volatility instead of trying to time the market is the key to long-term financial success. To better prepare, you have to focus on key data points and economic indicators that could positively impact your investments in the future. To help guide you, I am offering all readers our\u00a0Just-Released Stock Market Outlook Report.\u00a0<\/a><\/strong><\/p>\n\n\n\n This report looks at several factors that are producing optimism right now and contains some of our key forecasts 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! With the worst of the pandemic behind us, Mitch sees positive signs, but also volatility ahead<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9381","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9381","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9381"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9381\/revisions"}],"predecessor-version":[{"id":10439,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9381\/revisions\/10439"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9381"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9381"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9381"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
IT\u2019S FREE. Download the Just-Released Stock Market Outlook Report<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/9_pic1-1024x395.png\")
Source: Federal Reserve Bank of St. Louis4<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"