• Happy Monday! A rainy Sunday here this past weekend, which means it was a good day to read and also to finish Squid Game. If you haven’t seen it, I think Squid Game is a mash-up of Black Mirror, Hunger Games, and the movie Parasite. Maybe a touch of Citizen Kane in it too. Next up, has got to be Ted Lasso. Since I’m a fan of Jason Sudeikis (who stars in Ted Lasso), I’m probably biased when I say I thought he slayed it on Saturday Night Live this past weekend. 
  • The bull market is alive and well as the S&P 500 made a new all-time high for the first time since early September last week.  
  • Courtesy of Bespoke Investments, the Bespoke Report that came out last Friday afternoon shared some stats on the bull market that began last March:
    • At 577 days, the current bull market is so far only a third as long as the median bull market length of 1,512 days since WW2.
    • The 103.4% gain we’ve seen during this bull is already higher than the median bull market gain of 86.4%, but it’s well below the average bull market gain of 158.3%.
    • Bottom line, looking at historical precedents, this bull market has room to run.
  • Technically, the market is looking better and better. According to work from Strategas, the Value Line Index (equally-weighted composite of roughly 1700 issues) traded to fresh highs last week, after essentially spending the last 6-months in a range. This is a pretty good indication the “average stock” is getting better, and the market is no longer being driven exclusively by a small group of mega-cap growth names. The percentage of S&P 500 stocks trading to a 20-day high also hit its strongest reading since May. These are good signs for the overall stock market, and for actively managed investment strategies. 
  • Also, according to the aforementioned Bespoke Report, market seasonality is a big tailwind as November and December have historically been the strongest two-month period of the year for the S&P 500. 
  • Earnings are yet another positive. Of the 117 companies in the S&P 500 that have reported earnings to date, 84% posted numbers that beat expectations. S&P 500 companies are expected to grow profit by about 35% in the third quarter. Some of the biggest technology companies are slated to report earnings this week, including Facebook, Alphabet, Microsoft, Amazon and Apple. A third of the Dow companies are also set to release quarterly results this week, including Caterpillar, Coca-Cola, Boeing and McDonald’s. 
  • The Bespoke Report also notes that earnings season is off to a great start. The positive earnings trends that have been in place for the last five or six quarters appear to be intact. Companies continue to beat earnings and revenue estimates at a very high rate, which was a concern heading into this earnings season given widespread supply chain issues. Also encouraging is that stocks this season are reacting more positively when they beat estimates than they had been in recent quarters. As written about in prior Bullets, this is probably due to investors having greatly reduced expectations coming into this earnings season. If that is true, we could see bigger upside gains in response to earnings in the weeks ahead. 
  • On the last point of reduced expectations and less optimistic investor sentiment, here are some fascinating sentiment numbers from Bank of America’s latest BofA October Global Fund Manager Survey.  In short, it was the least bullish survey since October of last year (consistent with the individual investor sentiment we reported a few weeks ago), cash levels also jumped to 12-month high as global growth expectations turn negative for the first time since April 2020. Top concerns were inflation and China pessimism. That said, allocations to bonds slumps to all-time low and stock allocations still by historical measures. Allocations to commodities jumped. 
  • In John Authers’ latest “Points of Return” article (10/24/21), he had two notable comments on inflation.  First, he noted that five-year breakevens (which show the implicit bond market forecast for average CPI inflation over the next five years), have never topped 3% (which is the upper limit of the Fed’s inflation target) — until early last Friday morning trading. Second, he noted that Fed Chair Jerome Powell made these interesting comments last week about how his thinking on inflation might be evolving: The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation… Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages. If we were to see a risk of inflation moving persistently higher, we would certainly use our tools. 
  • As for the bond market, Ten Year Treasury Yields rose last week, closing at 1.66%.  Yields did hit a high of 1.69% last week, their highest levels since May 13, 2021.
  • Bitcoin prices finished slightly lower last week, closing around $61,000, but that was after hitting a new all-time high just under $67,000 earlier in the week. The first Bitcoin ETF in the U.S. was introduced last week and it was the biggest new ETF in history in terms of raising assets in its first few days. As A Wealth Of Common Sense’s Ben Carlson writes: …the ProShares Bitcoin ETF (ticker BITO) garnered more than $1 billion in assets in its first two days of trading, making it the fastest ETF to ever reach that level. It’s possible we have all underestimated the demand for Bitcoin in the wealth management industry. Just wait until a spot Bitcoin ETF comes out. It’s going to be massive.
  • This week’s economic data schedule includes a lot of housing and manufacturing data and 3Q21 GDP on Thursday. The consensus is that real GDP increased 2.8% annualized in Q3, down from 6.7% in Q2. 
  • This week’s guest on Orion’s The Weighing Machine will be Maria Quinn from Vanguard. The topic is the well-known and oft-quoted Advisor Alpha study from Vanguard showing the value advisors provide their clients:  Putting A Value On Your Value.
  • Another short, thoughtful read by one of the best financial writers around, Morgan Housel’s Nature shows how this all works.
  • Want to know more about the Net Promoter Score (NPS)?  This Harvard Business Review article explains why it has become an important measure of client and employee satisfaction.
  • Here’s an “Awesome” picture for this week.  It’s kind of like last week’s.  Gotta love those starry nights. It’s from an article on 7 ways to be awe inspired in everyday life.
  • For more resources, please check out the Financial Advisor Success Hub, and as always, please let us know what we can do better at rusty@orion.com or ben.vaske@orion.com.
  • Thanks for reading and have a great week!
2730-OPS-10/25/2021

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