Markets Have Climbed Out of the 2020 Hole… Now What?: Market Commentary from Cabana’s CEO – May 10, 2021

4 months ago

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Earnings season is wrapping up and more than 80% of all companies beat estimates. Aggregated earnings are projected to grow at an annual rate of 7% according to FactSet. This is not the double-digit growth we were seeing two years ago but is impressive nonetheless given all that has occurred in the past year. The U.S. economy and its people are resilient. Don’t ever bet against the United States. We may stumble and fall, but we always get up. 

Stock prices have continued to move up in line with earnings. The past six weeks were extraordinary. Some pullback is probably warranted as investors reset expectations for the rest of the year. We saw an awfully weak jobs number on Friday, which investors immediately took to mean the economy was not overheating and there is room to run. Equities finished the day in the black and bond prices were down. This is the exact opposite of what would be expected on the jobs weakness. Sometimes it takes a while for things to fully play out.

Today, we saw big selling in technology, with the Nasdaq down 2%. The S&P 500 was down 1% and the stodgy old Dow was the winner, down just 0.10%. Bonds were down again, and yields rose. The Nasdaq continues to underperform as money has rotated out of big tech and into the cyclical economy. This is a good sign as we have pointed out over the past few months. It may however cause some temporary pain, simply due to how much these stocks make up the market-cap-weighted stock indices. 

Now seems like a good time for investors to reevaluate what the rest of the year will look like. We have climbed back up the cliff that was 2020 and now what? That is always the question and will be answered in due time. Bond yields haven’t backed off and that is where I look first. They aren’t climbing like earlier this year, but they aren’t falling either. The bond market usually leads. We will take it day by day.


February 23, 2021

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