The Week Ahead: Is the US Economy Having a Goldilocks Moment?

Welcome to Advisorpedia's Week Ahead.  Here's what's happened last week and ahead for this week.

Last week’s market recap 

  • S&P 500 has made 19 record-high closes in 2021 alone - the last one was yesterday thanks to a 0.15% gain on record low volume for 2021
  • As of last Monday’s close, the S&P 500 was more than 2.5 SD above its 50-day moving average, which was not only the most extreme overbought reading in the last year but also the most overbought level since February 2017. Keep in mind that extreme overbought readings don't mean that the market has to immediately sell off, but it often suggests that a rally is due for a pause.
  • Market stalled out a bit last week - economic data no longer having a material impact on the markets which suggests a lot is already priced in.
  • Sentiment stretched from last Thursday’s AAII report -  bullish sentiment surged by the most since November to 56.90%.  The last time this reading was higher was way back in early 2018. That year SP500 closed the year down 14.5%, Nasdaq Comp -18.2%, Russell 2000 -22.5% and Dow -13.1% from their intra-year highs


  • Unemployment data don’t include the 4m who left the labor force these past thirteen months. 
  • We have a total of 6m outside the labor force who told the BLS they would take a job if offered one. 
  • We have another 6 million underemployed in the sense that they are working part-time but would prefer to have a full-time job. 
  • In total, the aggregate pool of available labor currently sits at 17 million, which is 50% above the pre-pandemic level of 11 million. 
  • With the economy now 72% engaged, and there are still 8.4 million less employed persons than before the pandemic struck - that’s a story of productivity GAINS and concerns over how the face of the labor pool and jobs has changed

Quick warning on bonds

  • Average yields for CCC-rated bonds have fallen to a record low of 6.1% while Treasury yields are almost at pre-pandemic levels
  • Different between high investment grade corporate and junk plunged to 200 basis points - 3 year low
  • Money managers are loading up on this stuff like there is no default risk


  • Jamie Dimon’s letter (JP Morgan) 66 pages and 35,000 words. Man has some time on his hands
    • Called for a boom through 2023 and Goldilocks moment - remember bears come next!
    • Just over a year ago he predicted 20% unemployment (actual 14.8%) and in August 2018 he called for the 10-year to hit 5% (peaked at just over 3% and was down to just over 2% pre-pandemic)
  • Good news for global economy - Shipping companies ordered a record volume of container ships last month, signally confidence in rising global trade volumes. In 2020 the ratio of order books to fleet size had reached a 30-year low.
  • Put this into the category of things I never thought I’d see - last week France’s Finance Minister Bruno Le Maire said that “we are not far from an agreement within the OECD” on a global minimum tax system, following US Treasury Secretary Yellen’s comments on such last week. Le Maire also noted “very in-depth discussions at the technical level” between the French and American governments on digital taxation, an issue which nearly sparked a trade war last year.

Economic data to watch this Week

  • Monday, April 12: March Treasury Budget.
  • Tuesday, April 13: March Consumer Price Index.
  • Wednesday, April 14: Weekly MBA Mortgage Applications Index; March Import/Export Prices; Weekly EIA Crude Oil Inventories; April Fed Beige Book.
  • Thursday, April 15: Weekly and Continuing Jobless Claims; April Philly Fed IndexMarch Retail Sales; March Industrial Production & Capacity Utilization; February Business Inventories; April NAHB Housing Market Index; EIA Natural Gas Inventory report; February Net Long-Term TIC Flows. 
  • Friday, April 16: March Housing Starts & Building Permits; April University of Michigan Consumer Sentiment(Preliminary).

Earnings to Watch This Week

  • This week we’ll officially kick off the Q1 earnings season as the major banks all start to report results this week. The pace of reports will start off slow but steadily pick up steam as the days go on. 
  • Just 23 companies are scheduled to report this week, but that number will more than triple he next week and then more than double again the week of 4/26 which is the peak week for reports. There will be one more busy week of reports after that before things start to peter out after the first week of May.

...... and so much more.

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Resources: Tematica Research | Chris Versace | Lenore Hawkins

Related: The Week Ahead: The Effect of Our Changed Habits


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Lenore Hawkins, Chris Versace

Chris Versace  00:00

This is the week ahead brought to you by Advisorpedia and powered by Tematica Research I'm Chris Versace Tematica Research's Chief Investment Officer and joining me as always to break down last week and share with what you really want to be listening to and paying attention to when the weekend is Tematica as chief macro strategist Lenore Hawkins, Lenore, how are we doing? 

Lenore Hawkins  00:27

We are doing really good.  Although the market seems like it's getting a little bit nervous. It's not having as good of a week as I've been out. We had as of I think just you, you use what you sound all hopped up? What's going on over there? There may have been it's a possibility that I might have indulged in a tad too much coffee today. It's actually a long week. So.

Chris Versace  00:50

Alright, that's fine. Well, so anyway, you started. Wow, look, you know, I was out part of this week doing just that. And talk to me about the week because you started to say that it hasn't been partying like it's been doing of late. It's a little more of doing a waistline check a sober check if you will, right.

Lenore Hawkins  01:15

Because sober check is about right. The market is kind of stalling out. And what's really interesting to me is that the good really good economic data coming in isn't really having the big material impact that we would expect it to have, which suggests to me that an awful lot of really good news is already been priced in. You've got the sentiment from investors already really, really high. Last Thursday's AI report. bullish sentiment had surged to the most since November 250 6.9%. And the last time the reading was this high or higher. It was back in 2018. Now, if you remember what happened, and this was back in early 2018, if you remember what happened that year, that year, the s&p 500 closed down about 14.5%, the NASDAQ a little over 18. Russell a little over 22% from their intra year highs. So we have sentiment this high, it's tends to not be super exciting for the market.

Chris Versace  02:17

So so just two things. One, I think that over the last several weeks, there's been a lot of positive news. And we'll we'll get it we'll get into some of that. But you know, the feds not Feds not taking away the monetary Punchbowl right stimulative checks went out, Biden announced and previewed and is now discussing infrastructure. We've seen earnings expectations rise. I mean, there's a lot there's been a lot of positives injected into the marketplace. Now the question is, does the rubber hit the road?

Lenore Hawkins  02:47

Or did it already hit?

Chris Versace  02:49

Correct? Correct.

Lenore Hawkins  02:50

I mean, I think that's what we're really seeing is a lot of this great news and possibly better news was already kind of priced into the market. And so now investors are just taking it a chance to sort of digest it all. Yeah, I think look at any you got to take into consideration just the actual state of the market right now. We've got the s&p is roughly more than two and a half standard deviations above its 50 day moving average. That's the most extreme overbought that we've seen all year, but it's the most overbought since February 2017. Keep in mind that when we get to Super overbought, that doesn't mean that it's a really good timing signal. It's not like when you say, Oh, look, we're overbought boom markets gonna come down doesn't mean that. But what it does mean is that forward returns

Chris Versace  03:38

Are more challenging ...

Lenore Hawkins  03:39

more challenging, and it does mean that a pause is probably coming. And just how pricey is this market? Well, the cyclically adjusted p e ratio started the year at 33.8. It's up to 36.6. Now, that's the second highest in history. So yeah, that's a pretty pricey market. Alright. Volatilities coming down.

Chris Versace  04:05

So I think you're I think you're onto something here. And I think, and we'll, we'll talk about this in a few minutes, but the next few weeks, I think, is really going to set the stage for probably the next six months. Right. In the next few weeks. We'll be hip deep in the march earning season. And we will see if companies are actually seeing the benefit of the reopening what they're saying about the vaccines and the the ability for people to be moving out and about, we'll be hearing from airlines. And, you know, we'll we'll get a better sense on what the travel industry looks like. Both from a business and tourism perspective. There's a lot coming. But But what I want to know from you Lenore, we didn't have Oh, so much economic data last week. Right? What jumped out at you because I know you were laser focused on this.

Lenore Hawkins  04:55

Well, the jobs market so what we did get was the job. Report in the Bureau of Labor Statistics, and that found that job openings and this, this shouldn't be a big surprise, job openings rose to a tier two year high on an absolute basis. And if we look at the job openings as a percent of the total labor force that's actually at a record high. And part of that is because with the pandemic, the labor force really shrunk kind of understanding, right? Particularly when we see that over the past 12 months, about 1.5 million people 55 and older, just stepped out of the workforce. Now that may not be permanent, me that may not really just be retirement, it could be, they didn't want to be going to work and maybe contracting the virus, right, this was kind of a situation. So we saw that that that labor force really contract, what we are seeing is that hires as a percent of the labor force were in the 91st percentile all time in February. So that's telling us that there's just there's a lot of really dynamic activity. And that's, that's all fantastic to see. But what we are seeing is a return of the dynamic we had even pre pandemic, where we had a lot of job openings. And not a lot of hires that with that level of job openings. And we're right back to and I think it's even going to be worse this time around, we're back to that problem of having a mismatch between the kind of skills companies are looking for, and the kind of skills that are available in the workforce.

Chris Versace  06:24

So it's really the need, as we say, internally, it's matica, to tool and re tool. Right? Exactly, so that their skills match the job openings. And and I think you're right, after a year of, you know, changing how we buy what we do introduce a greater introduction of automation and technology, skill sets that were already on the on the periphery of being outdated, outmoded, or even more. So now,

Lenore Hawkins  06:52

exactly, it got even worse, because if you look at the the whole job pool, the aggregate pool of available labor currently is around 17 million, that are just sitting out there that some of these are actually looking for a job, some of these are people sitting on the sidelines and just can't face it anymore. That's about 50% higher than the pre pandemic level of 11 million. And at this point, we've got about 72% of the economy engaged and yet, there are still that 8.4 million less employed persons than before the pandemic struck. Now the real issue here looking forward is that's a story about productivity gains, which is great, but kind of a drag on the economy at the same time, because all of these people who aren't engaged in the workforce are going to be a drag on the economy, then otter income, and they're going to be dependent on the social safety net.

Chris Versace  07:43

Or they'll just be net spit nets, net Savers,

Lenore Hawkins  07:46

Right. But they're still not they're not active spending parts of it.

Chris Versace  07:49

Right. Now, the Fed also came out and they released their most recent minutes, which they do on a on a lag basis. You know, we spoke earlier that the Fed has signaled that they're going to keep the Punchbowl in, in play anything different in those minutes.

Lenore Hawkins  08:07

That's a pretty boring, really sprinkly, which is actually kind of nice. We've got enough going on. Right? Now pandemic, it's fine, I don't really want anything more. What they didn't mention is the possibility of altering the interest rate that they charge on excess or that they they gave on excess reserves, between meetings. So they may not actually tell us about it, what can happen in between the meetings, just to make sure that the Fed Funds rates remains within the target range. And the notes did reveal that participants still believe that it's going to be some time until substantial further progress towards the committee's goal has actually been made. Meaning Yeah, we're still not seeing us get where we want to be. And they still consider the risk of inflation as quote, broadly balanced, which means they're not worried about it right now.

Chris Versace  08:54

So there's still so they're still sticking to the script is what it sounds like no script. But so. So what did they say, though? Because you and I have chatted about this here in this, this forum that we have about some of the complex supply constraints that we've been seeing. Are they saying anything about how that might impact you know, prices and inflation?

Lenore Hawkins  09:14

You have your like little Houdini hat on a little glow? Because yes, they specifically called out supply constraints, and said that they could cause temporary price increases, but they believe it's just transitory, which we've talked about, we think that's the case. You've got we've talked about how shipping right now really complicated. You've got empty container ships where you do not need empty container ships and you've got full container ships where you need empty one. So it's gonna take a bit to work this all out.

Chris Versace  09:43

I agree. I'm just the one I'm most curious about is something we've chatted about for the last several weeks, which is the automotive chip supply constraint that's out there, you know, it's hobbled production. And when I'm just wondering, you know, just to match some timing up On that where it could be as late as well into the fourth quarter of this year before supply really is back on track. I just have to wonder what is the Fed consider, and I'm using air quotes here for everybody. transitory

Lenore Hawkins  10:16

the $10,000 question. Yeah, exactly. I believe that's actually one. One of the feds favorite terms this transitory we've been we've been dealing with transitory since the great financial crisis. So you really wouldn't want to do a drinking game on fed transitory?

Chris Versace  10:32

No, no. All right. So, I don't know, it depends on your, I don't know, I don't listen what while I'm full of energy,

Lenore Hawkins  10:38

I know I'm gonna take an energy hit here when you talk about bonds. But let's let's quickly get a word in, and then move on. Okay, so one thing to keep an eye on in the bond market is that we've seen the average yield for Triple C rated bonds has fallen to a record low of 6.1%. at this same time that Treasury yields have been moving back up, and are at pre pandemic levels. Now, what that ends up meaning is that the difference between the high grade investment quality corporate bonds, and junk, the difference between those two has fallen to about 200 basis points. And that's about a three year low. So what that means is money managers loading up on the junk and treating it like there's no real risk of default.

Chris Versace  11:23

You know, I hear you say that, and I think that old Letterman line, David Letterman, for the for some of those folks who may not catch that reference. What are ya? Yeah, happy on the junk,

Lenore Hawkins  11:34

that it seems like they're all very happy with the job.

Chris Versace  11:39

Okay, okay. Now, you and I tend to look at both the formal economic data, we look at other other indicators as well. We also kind of factor what some, some other folks have to say. And I know, I didn't read it because I again, I was out for a couple days this week. But you were saying that JP, Morgan's jamie diamond, man has a lot of time on his hands.

Lenore Hawkins  12:03

That man is verbose. He came out with his annual letter that was 66 pages and around 35,000 words. I mean, you would think you had a bank draw something?

Chris Versace  12:15

Did you have a lot of jokes in there, like Buffett did not really know it wasn't he

Lenore Hawkins  12:19

was not that exciting. But what was interesting is he called for a boom in the economy through 20. And referred to us as having the us having a Goldilocks moment. And I would just like the Goldilocks situation tends to end with the bears. Just over a year ago, he looked was looking for about 20% unemployment, we actually hit 14.8. And in August of 2018, he called for the 10. year to hit 5%. Yet it just picked it over 3% and was down to just over 2% precondition. Yeah, all of that is not to say that jamie diamond isn't a super smart guy. It's just predicting the stuff is really, really hard and trying to design a portfolio around the assumption that you can accurately predict these things far in advance. Good idea.

Chris Versace  13:12

He sounds like an overreaching pendulum is what he sounds like.

Lenore Hawkins  13:16

I'm gonna go with you on that.

Chris Versace  13:17

Excellent. What else what else caught your eye before we share what we need to watch for the for the week ahead On the economic front?

Lenore Hawkins  13:25

Well, back to our transitory shipping costs. Actually, really, really good news, because I tend to see things to make me worry, it's kind of my job being a bit of a worrywart. And that's sort of the macro view. But some really good news this week, shipping companies have ordered a record volume of shipping, it can have container ships last month, that really signals confidence in rising global trade volumes. Put that in context, in 2020, the ratio of order books to the actual existing fleet size had reached a 30 year low. That was saying everybody's not so gung ho on global trade. Now, they seem to be feeling a lot better about that.

Chris Versace  14:03

Hmm. Interesting. It's funny, it's funny, because on my trip to New York, I saw right around the Port of New Jersey, Newark in that area. I mean, these things were steady was like a city. Yeah, in there in terms of the shipping container.

Lenore Hawkins  14:20

So that that that's actually the problem. Yeah, that's exactly the problem you've got because of everything that happened. And because we still are having these problems with what are the rules? And how are we going to deal with the actual people on board these ships that are our supply chain, because some countries are saying, I don't wanna let you in. We have to do all this check on you. And the whole thing is just getting real slow. That that is actually transitory at some point that will get sorted out.

Chris Versace  14:46

Do you think global tourism and the hit that it took last year, I mean, it's roughly 10% of GDP. The hit that it took because of the pandemic Do you think that falls into the transitory category too,

Lenore Hawkins  14:57

I think that's going to take a bit longer. Part of it. So the actual vaccine rollouts America, you have no idea how lucky you are. I’m over in Italy, and things are not going as well when it comes to getting these vaccines rolled out. For example, I was very upset about this on Twitter, there were more there's like 100. And I think is 103,000 cars were pulled over on Easter by the police in Italy to double check where people were going, what they were doing, they were following the lockdown rules, while at the same time only 88,000 vaccines were given. So the government does a little bit more concerned with making sure that people don't have fun and see their loved ones, then getting vaccines rolled out. Nothing about this at all.

Chris Versace  15:42

It's fine. All I can say to that is by the time this is published, I will have received my second jab of moderna. My The only response I have to that is USA, USA, USA.

Lenore Hawkins  15:57

I give you that but keep in mind that global tourism isn't just us.

Chris Versace  16:06

No, no, no, this needs

Lenore Hawkins  16:07

to go other places. And while the US can sit there and say, okay, it's fine. I'm gonna go to Italy, screw it, I've been vaccinated. It's not that simple. Because right now, the hotels are shut. And they're not going to even if all the tourists coming from the States or from the UK are vaccinated. The problem is in Italy, you can't have the employees coming in and serving you because they can give it to each other find the tourists are all great, but

Chris Versace  16:32

I'm not. I am not going to Italy for a DIY experience. That's not going to happen.

Lenore Hawkins  16:42

No. Yeah, exactly. That's that's part of the problem. And you've got that in a lot of the world. A lot of the places that people love to go tour are places that have not been able to roll out this vaccine as quickly. So that is a big headwind, about a decent size headwind to the global economy.

Chris Versace  16:57

You're killing me, smalls, you're killing me. Do you do you? Do you give just as a side note, because we we actually wrote something on NASDAQ about this vaccine passports. It seems like there's a lot of there's a lot of different efforts that want to try and solve this problem. I'm hoping that it happens. I hope it is able to break the logjam, so to speak. I do worry about interoperability and safety of the data, though.

Lenore Hawkins  17:24

What you like like we've had problems with that interoperability so easy? Well, I think what we are seeing is airlines stepping in, and you're having airline consortiums working together to deal with that problem taking carbon out of the government hands and dealing with it in the private sector where you get a little bit not that the government doesn't do a good job. It's just the private sector gets that immediate feedback when things don't work. So things tend to get moving a little bit faster.

Chris Versace  17:51

I was so excited there when you started leading with public companies blazing the way and then you walked it back.

Lenore Hawkins  17:57

Now. We're getting that we're getting they're

Chris Versace  18:00

killing me killing me. All right, so let's, before we jump into some stocks and news last week in earnings, what is on the economic docket? For the week ahead.

Lenore Hawkins  18:12

So for those who really like maybe a little bit of pain, you know, on a Monday, the march Treasury's gonna come out. And if we're going to read the federal budget, I highly recommend maybe pouring yourself a nice glass of scotch while you're at it. On Tuesday, we will get the Consumer Price Index, which is probably going to indicate that inflation is ticking up again. You know, as the Fed said, it's transitory.

Chris Versace  18:40

Right? Well, that to me, this is gonna be interesting, because you always want to juxtapose the PPI and the CPI right, and what what prices are producers having to pay? And really, are they able to pass it along to consumers? That's always the key question. And then there's some more fed data out next week, right?

Lenore Hawkins  19:01

Yes, but we before we get to that one, the one I'm also gonna be looking at is is the MBA mortgage application index. And the reason on that is we're starting to get signs that housing could be rolling over a little bit, and we're seeing slowdown in the mortgage applications. Now a lot of this is we all know that there's just unbelievably low volume in the housing market. But that pricing a the price versus the average earnings, you know, that can't continue to go up. You can't have it getting continued cows getting more and more expensive, while incomes aren't going up. And now that go on forever, so I'll be keeping a good eye on that one. But like you said, fed Beige Book that will also be coming out on Wednesday, and that is definitely a really titillating mastery. Well, really good idea what's going on. From the business perspective.

Chris Versace  19:53

I think it's going to be just because of the timing of it. This is the April Beige Book, which means that I think Ruby was done just in the last couple of weeks. So this really starts the April facing data that we're gonna get.

Lenore Hawkins  20:07

Yeah. giving us an idea of how just how great how gangbusters is q2 gonna be?

Chris Versace  20:12

Yes. And then right after that, we get the April Philly fed index the next day. And then we got to, then we got the big three of the week.

Lenore Hawkins  20:21

We have the industrial production and capacity utilization. Always very exciting. But what matters with this is slack. You keep talking inflation, difficult to get inflation when you've got a lot of slack. So when we're talking capacity utilization not being so high, that's when we're talking about slack. But we will want to see industrial production continuing to take up, we're also going to get the nhB housing market index. So that'll be another indicator on is this super red hot, scorching housing market? It's starting to get a little bit tepid.

Chris Versace  20:54

Huh. Don't forget the other two big ones, the march Retail Sales Report. That'll be coming in. It'll be interesting to see. It'll be interesting to see online. Well, there's that but there's also the cadence and the timing. Right. So the the cadence January benefited from the from the December employment checks. February retail sales fell. Now we're March. We know some checks starting to go out in March, really March. So we'll be curious to see what kind of an initial bump we see. And that might set the tone for what we see in April, which also of course had Easter. And then your favorite topic or at least appeared to be so far today. Housing as we get them as we get the march housing starts been a very homey mood. I Well, we always know that you're in a construction mode, so that's fine. All right. Should we switch over to stocks? We should. Alright, rapid fire here. So a couple these are the companies in items that kind of jumped out on us last week. I can't even believe I'm going to share this one about buckle. For the five weeks ending April third, their sales jumped 240% That's insane. Especially when you look but especially when you think about that compared to the same time not in 2020. But go back to 2019 it's up almost 70% so pandemic didn't happen people are still living their lives up 70% That's crazy. That's crazy peasy crazy. The other crazy one and I think this really fits with our cash strapped consumer investing thing was Costco Wholesale. Once again, freakin knocked it out of the park March net sales up 17.6% year over year, strip out, you know, gas foreign exchange up 11% in the US in the month of March alone, Canada up 13% ecommerce there 54.5% on freakin unbelievable.

Lenore Hawkins  22:57

Which goes back to what we were talking about earlier with this mich mismatch in labor pool versus job openings because we have seen this massive shift into online spending. And that's a different set of skills then the actual brick and mortar.

Chris Versace  23:11

Totally. I'm going to move something up based on our little outline here. So Costco is up ecommerce sales 54 and a half percent in March. Like we said, the title there is Did you see the report about Amazon this week? And what they're doing? Yep. We're going on buying malls. Yeah. And turning them into just amazing. Amazing, right? Well, it's thinking about the size of these things, though. So apparently, last month, they took over a mall in Baton Rouge 3.4 million square foot distribution centers will become that follows something that they did in Knoxville, Tennessee about a month earlier. 220,000 square foot distribution center. And this follows something they did in December 121,000 square foot distribution center with it what used to be the Greendale mall and did a little digging. This is some data from core site, apparently, very quietly under the hood. Between 2016 2019 Amazon converted 25 shopping malls. That's, that's unbelievable, but it speaks to the power in the shift of how people are buying.

Lenore Hawkins  24:29

Don't you feel that's a little bit of salt in the wound? They destroy it's the deflationary retail shopping Death Star and now they're buying a very malls that have just gone down.

Chris Versace  24:37

Well, no, I mean, if you really want to rub rub salt in that wound, not only do we kick the crap out of you, but we're gonna buy you at cents on the dollar. Haha,

Lenore Hawkins 24:46

That didn't feel good. So

Chris Versace  24:47

Tell us I'm not feeling good. Facebook,

Lenore Hawkins  24:51

People who want to buy iPads and Mac books.

Chris Versace  24:53

Oh, that's true. That's true. We are hearing about you know, Apple starting to feel the pinch of some of these chip shortages. We'll see about that. I'll talk about that more in a second. What about and I know you shared a little personal detail with me a couple weeks back that you exited Facebook. Finally, you, I, I have been off that cesspool for some time now. What did you think of the news that 533 million Facebook users had phone numbers, IDs, full names, locations, birthdays, and in some cases, email addresses, hacked and published for free.

Lenore Hawkins  25:35

I have to say that if you think there's anything on Facebook, that isn't completely 100% public information, you're crazy.

Chris Versace  25:45

You've just called a lot of people a fool. You realize.

Lenore Hawkins  25:49

It's just it's Facebook. We've seen how either they use it or how that information gets out because of it advertisers on there, it's just buyer beware, right? user beware, this is not a play, not

Chris Versace  26:03

even buying anything. It's ridiculous. Anyway, anyway, let's let's talk about two other things. The Biden administration infrastructure proposal, it included 174 billion to boost electric vehicle sales, and it's looking for apparently 100 billion in new consumer rebates in 15 billion to build 500,000 new electric vehicle charging stations, companies to benefit Tesla, you know, other people, other people that are moving into the Eevee space, General Motors, for example, blink charging, which is one of the ones that has a network of charging stations, as well. So I think that we're we're gonna have to watch and see how this goes. I suspect that there will be there'll be folks that are very much in favor of this and it passes. From our perspective, we love seeing this as you know, because it's just more confirmation for our cleaner living investment theme.

Lenore Hawkins  27:04

Yep. cleaner planet.

Chris Versace  27:05

cleaner planet. That's right. All right. And then the last one, this is a this touches on one of our investment themes, the Sustainable Future of food that we talked about. But it's not one that is always in the headlines, like cleaner living or digital infrastructure and some of the others. This really centers on the precision precision. I can't even say it, precision, ag aspect of it. Jeez, Louise. So, but let me preface this by saying that, you know, a lot of our investment themes reflect what's happening with consumers. But what's always always fascinating to watch is companies pivoting their businesses one way or another, to catch the tail winds associated with those themes. And here, we had to Raven industries purchased all the IP and patents of j bridge robot. That j bridge robotics, which is an early developer of automated ag technology, and then app harvest acquired route AI, and artificial intelligence farming startup that creates intelligent robots to help manage high tech indoor farms. So, you know, again, we don't talk about the Sustainable Future of food all that much. But this is, this is going to be big, from from a productivity perspective. And from a way to limit pesticides, which I think is gonna become more and more important.

Lenore Hawkins  28:27

It's all about how to get Oh, we've got a growing population, we need to feed more people with less resources, doing less damage to the planet, so anything that can help with this precision agriculture is probably going to do pretty well.

Chris Versace  28:41

Sounds like a pain point to me, and you know, we love them. Okay, talk to me even more. Correct. Talk to me about earnings next week, the start of March quarter earnings season, here we go.

Lenore Hawkins  28:53

So this week, we officially kick off the q1 earnings season and all the major banks are are set to start reporting results. The pace is gonna start off a little slow, thank God, but it's gonna steadily pick up as the days go on just 23 companies are scheduled to report this week. But that number is going to more than triple in the following week. And then more than double again the week of April 26, which is the peak week for reports. One more busy week after that, and then we can start calming down so this will be a Chris and lol going to be pounding the coffee over the next couple of weeks.

Chris Versace  29:27

pounding not pounding, not me. I'm getting an IV. Right, right. IV. Right. So, so let's let's set the stage for the march quarter earnings season because, yeah, it's been kind of fascinating, I think and we we alluded to it earlier, but over the last, you know, three, three and a half months are really 2021 to date. Earnings expectations for the s&p 500 have continued to move up. So coming coming into 2020 earnings for the march Quarter were expected to be up about 15%. Which, again, some of that is anniversary in the pandemic, we hear results similar, like what we talked about with buckle and other companies. But now expectations are for March quarter earnings to be up almost 24% year over year. That's that that is getting to be a big number.

Lenore Hawkins  30:21

That is getting to be a big number. And we'll see. And then the markets, with the markets not getting terribly impressed with the strong economic data. There's a lot of pressure and like you said the next couple of weeks are going to be very telling.

Chris Versace  30:36

Well, I think that's 100% correct. And and here's the other part to that 2021 ETS expectations for the s&p 500 have risen about 5%. So far in 2021, around $176. Just about I think that in order to justify the multiple expansion that we have seen, we're going need we will need to see exactly 2021 ETS expectations have to go even further.

Lenore Hawkins  31:06

I think you're onto something …

Chris Versace  31:07

like could very well be Now you mentioned a sea of earnings. Wednesday through Friday really for the banks Goldman Sachs JP Morgan, Wells Fargo, Bank of America, BlackRock, Charles Schwab, Citi, Group B and y Mellon, Morgan, Stanley, and PNC. And when we get these reports, we're going to want to watch what do they say about trading activity? What kind of investment banking are they doing? I suspect the IPO volumes will be rather nice. What are they talking about in terms of loan volumes? What are they talking about terms of credit quality, credit card metrics, charge offs, delinquency rates? The other thing, the other two things actually, to listen for are going to be what do they say about dividend and buyback prospects for the middle of the year? Because remember, the Fed after conducting their latest round of stress test said, Hey, banks, we think you're in the clear to raise your dividends and restart or upsize, perhaps your buyback program. So I think we're going to be listening for some of that. And then of course, there's the big Fallout. I got to be honest with you, I not sure how to pronounce this. So I'm going to give it a go. And you can correct me from the ARCHOS fund. Oh, no, no,

Lenore Hawkins  32:23

there's only one way to pronounce it. given everything that happened. The arch egos fund.

Chris Versace  32:32

That is probably right now it's Credit Suisse said they were taking a 4.7 billion hit because of this spectacular blow up of the arch egos fund. And we know that you know odds are JP Morgan, Morgan Stanley will probably get you know, tinge with it too. But we'll we'll we want to be we want to be hearing about that. Now, outside of banks, there's a bunch of other earnings to be had Lucky for us. And for you listeners, it is all clustered on Thursday, which paired with all the economic data that drops this coming Thursday. It will be a pretty pretty busy day. And your hosts here will be red lining, as we said before coffee. Having so so I so so what do we have? We have Delta Airlines Look, you're over your travel metrics. What are we seeing what's going on with ticket pricing and what do they see for the coming months? juxtaposing what's happening in the US versus what Lenore was saying about in Europe and other markets. We've also got PepsiCo reporting, I want to know what is going on the mix of the business between grocery, particularly beverage business and away from home. Yeah, well, but that's that's the thing. What is happening at the fountain soda. Are we starting to see more volumes there or not? I just see it as a nice core corresponding indicator for the opening of the economy. And of course Pepsi's other side of the business is snacks, but also between snacks and beverages. What are they doing to continue to pivot their business mix towards cleaner living related products? So that's I think it'd be key but the big one, Lenore, the big one for me is going to be Taiwan semiconductor.

Lenore Hawkins  34:17

Talking to me, talk to me about chips.

Chris Versace  34:21

Hey, that's pretty good. From PepsiCo to Taiwan, semiconductor talking chips. Very well done. So what is driving their business? We know that the automotive chip market is under pressure, you know, so we're really gonna be focusing on their comments on mobile and 5g in particular data center as well. Both are key parts of our digital infrastructure investment theme. When did they see the automotive chip market rebounding? And more importantly, how does that tie to this $100 billion capex capacity expansion plan that they've talked talked about over the next couple years and then finally, you brought this up earlier, but you know, it sounds like MacBook and iPad chip orders are being pushed out. We'll be able to read into some of this for Taiwan semiconductor because those are the folks who are fabbing. Apple silicon.

Lenore Hawkins  35:18

Yep. And that insight for you.

Chris Versace  35:19

Yep. You said yep. And the way you ended on the tee, I was thinking robots for some reason. I don't know why. All right. And then the last two that will mention Alcoa just want to know what pockets of strength they seeing in manufacturing which industries which sub sectors and then JB Hunt, which is a logistics company, back to shipping. Back to shipping logistics baby. We know that weekly railcar loading data has rebounded significantly following the February winter storms. It's been vibrant on a year over year basis. rail and trucks to us are again, indicators of economic health. So let's see what JB Hunt has to say from a volume and pricing perspective. I think it's going to be good. All right. And then with that,

Lenore Hawkins  36:10

… And with that, that is your week ahead.


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