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The Power of Earnings Stands Tall: Market Commentary from Cabana’s CEO – April 26, 2021

4 years ago

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All major U.S. indices ended last week in the red, albeit only slightly. It was the first down week in the past three, and April overall has been strongly positive across the board. News of President Biden’s tax plan was the likely culprit for last week’s minor pullback. Markets sold off hard on the news Thursday morning, but rallied on Friday to erase most of the losses.

Earnings continue to roll in, and the results so far have been resoundingly positive. According to FactSet, 25% of companies have now reported earnings, with 84% beating estimates. Of those, 77% have reported revenues above projections. Last week, we discussed the power of earnings in moving stock prices and that reality stands tall today. There are a lot of big tech companies reporting in the next few days. It is prudent to expect some volatility as a result. All in all, we think things continue to improve on the economic front and equity markets reflect that.

Interest rates remain rangebound and that is certainly good news for fixed income and “conservative” investors. Interest rates staying put in the face of improving economics could be the result of the bond market being out ahead of everyone else. That is often the case and adds support to the argument that the majority of the interest rate pain is behind us. I believe rates can and should continue to rise as the economy regains its footing, but the pace of those rising rates should normalize.

Finally, it is important to note that market breadth remains positive. We began noticing this improvement last fall and the trend continues. It is a good thing when lots of companies are participating in market advances. It is a big negative when just one sector of the market is carrying the rest. That was the case for much of last year when technology was the only game in town if you were an individual stock investor.

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January 17, 2024

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Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

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The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq