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Chart Title	Date
Industry consolidation and inflation	1/21/2022
Which way are gold prices headed?	1/14/2022
Which way are rates going?	1/7/2022
Mid-caps make their case	12/31/2021
What stocks offer the most value?	12/17/2021
Online retail sales peaking?	12/10/2021
SPACs keep IPO market hot	12/3/2021
Unhappy customers still spending?	11/26/2021
Budget deficit improving	11/19/2021
Industrials in the spotlight	11/12/2021
Corporate profitability hits record high	11/5/2021
Gold flutters in Fed's wake	10/29/2021
Value or growth stocks?	10/22/2021
Stocks followed this pattern	10/15/2021
Small caps vs. inflation	10/8/2021
Lumber prices down from record	10/1/2021
Tech firms repatriating billions to US	9/24/2021

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Industry consolidation and inflation

Inflation's impact and its primary drivers are sources of debate right now among market watchers. Central bank policy, supply chain issues, government spending, and other factors have all been cited as contributors, with expectations that any changes for these factors will affect the direction of inflation. In the US, corporate consolidation—where industries have become increasingly concentrated among a few key players over the past 15 years—has led some analysts to conclude these companies have greater ability to keep prices relatively higher. The more control a company has within its industry, the more ability it has to control pricing.

Source: Barclays Research, Compustat, Bloomberg. Data based on average Herfindahl-Hirschman index, which measures industry concentration, aggregated across industries.

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Which way are gold prices headed?

The Federal Reserve has spooked some gold investors lately, as the US central bank has increasingly hinted at moving to withdraw some of its monetary support for the world’s largest economy. More restrictive monetary policy is generally thought to be bearish for gold prices. On the flip side, inflationary pressures are helping provide some support for gold prices—in addition to the primary supply and demand dynamics for the precious metal.

Source: FactSet, as of January 12, 2022.

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Which way are rates going?

In addition to COVID trends, interest rates and the direction they go may be among the most important market factors in 2022. Globally, major central bank policy rates continue to be at or near historic lows. Several central banks had begun raising rates in 2017, after nearly a decade of cutting rates in the wake of the financial crisis, but the pandemic quickly put an end to that. Many central banks, including the US Federal Reserve, have telegraphed that they may begin to draw down their pandemic support and focus on fighting inflation. These measures might entail more quickly cutting back on buying bonds and raising rates.

Source: FactSet, as of January 7, 2022.

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Mid-caps make their case

Over the past 25 years, mid-cap stocks (as measured by the S&P Mid Cap 400 Index) have outperformed both large-cap stocks (as measured by the S&P 500 index) and small-cap stocks (as measured by the Russell 2000 Index). In the immediate months following the pandemic's most negative impact on stocks, small-caps outperformed both large-caps and mid-caps. More recently, larger-cap stocks have outperformed. Proponents of mid-caps believe they offer more growth potential compared with large-caps, while buffering against some of the relatively higher levels of volatility of small-caps.

Source: FactSet, as of December 27, 2021. Performance is indexed to 100 and is based on total returns (i.e., including dividends).

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What stocks offer the most value?

With 2021 coming to a close, US stocks are poised to post double-digit gains—with a wide performance dispersion at the sector level. In terms of value, nearly half of the low price-to-earnings (P/E) stocks are composed of financials, with another significant chunk of companies from the discretionary sector. The high P/E stocks are actually more diversified, with technology, health care, and industrials representing 15%-20%.

Source: Strategas, as of December 12, 2021.

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Online retail sales peaking?

Much is often made of the ongoing shift in the retail shopping landscape from in-person sales to online. While the long-term trend appears to be moving clearly in that direction, brick and mortar US sales still represent more than 80% of total sales. The percentage of online sales jumped during the early days of the COVID-19 pandemic, as physical locations closed amid lockdowns. However, after peaking at 18% in April 2020, that short-term spike appears to have moderated in recent months, declining back to 14.3% in the latest reading.

Source: Strategas, as of December 3, 2021.

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SPACs keep IPO market hot

Electric vehicle start up Rivian made headlines after its recent IPO, making it one of the top IPOs of the year in terms of value. After the first full day of trading, Rivian was valued at more than $86 billion, which is noteworthy because the company has not delivered any vehicles to customers yet. Moreover, it is valued at a greater market cap than both General Motors and Ford. This is just one example of what some parts of the busy IPO market have looked like thus far this year. Juiced by SPAC deals, the number of US-listed IPO deals just broke through the previous high set in 1996. Of course, some investors are worried about how frothy the IPO market may be, and recent market jitters unleashed by the Omicron COVID-19 variant could pose another looming threat to IPOs' momentum heading into 2022.

Source: Dealogic, Wall Street Journal, as of November 16, 2021.

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Unhappy customers still spending?

If you are looking for reasons why US stocks keep rallying to record highs, despite global supply chain problems, COVID concerns, and less economic support from central banks, among other factors, consider looking to retail sales. After rebounding quickly out of the depths of the global economic shutdown in March 2020, retail sales have continued to surge to new record levels. Indeed, US retail sales rose another 1.7% month over month in October amid the many headwinds, including a drop in consumer sentiment over the past several months.

Source: Census Bureau, Haver Analytics, as of November 21, 2021. Grey shaded area represents recession period.

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Industrials in the spotlight

Perhaps boosted by the recently passed infrastructure bill, industrial and energy stocks are expected to see big increases in earnings per share growth of 37% and 30%, respectively. Consumer discretionary stocks, potentially bolstered by favorable comparables to 2021, are also expected to see a massive spike in year-over-year earnings growth of 27%. On the other end of the earnings growth spectrum, financial stocks are forecasted to experience a 9% decline.

Source: Strategas, as of November 6, 2021.

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Corporate profitability hits record high

Amid the lingering COVID-19 pandemic, uncertain infrastructure and spending bill discussions, potential policy shifts from central banks, global supply chain disruptions, rising energy costs, and a myriad of other factors, US corporate margins have never been higher. Indeed, the S&P 500 margin expansion is approaching 12%, a new all-time high.

Source: Bloomberg, as of November 2, 2021.

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Gold flutters in Fed's wake

While gold is roughly only a couple hundred dollars per troy ounce down from its all-time high set during the early peak of the COVID-19 pandemic worries, it has generally trended lower since April 2020. The ongoing, albeit stilted, worldwide economic recovery, coupled with signals by the US Federal Reserve and other central banks to taper back some of their historic assistance efforts, appears to have outweighed recent inflation worries that might normally help boost gold prices. Over the past several months, gold has broken above and below $1,800 per troy ounce several times, and is now trading near both the 50-day and 200-day moving average.

Source: FactSet, as of October 26, 2021.

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Value or growth stocks?

As you are orienting your investment mix, consider that earnings growth for value stocks is expected to vastly outpace growth stocks over the near term. For example, Q3 2021 consensus estimate earnings growth for the Russell 1000 Value Index stands at 64.1%, which compares favorably to 38.4% for the Russell 1000 Growth Index. Earnings growth estimates for these 2 groups is not expected to swap places until the second quarter of 2022. Of course, investors shouldn't mechanically shun one of these groups of stocks for the other, and there are risks to value stocks (along with growth stocks) that should be considered. In fact, value stocks dipped more than 6% from June through August, as the reopening euphoria that persisted in Q2 dissipated over the summer on renewed COVID-19 Delta variant fears. With that said, stock prices follow earnings, and value stocks appear well positioned, in terms of earnings growth, in the coming quarters.

Source: Strategas, as of October 17, 2021.

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Stocks followed this pattern

The calendar trend for September to be the worst month of the year for stocks held true last month. In fact, the S&P 500 had its worst month since March 2020, when the COVID-19 pandemic enveloped the global economy. Historically, October has been another relatively weak month for stocks (although still positive). Thus far, stocks are mostly flat this month. Bullish investors can soon point to the so-called "best 6 months," where the average gain since 1990 for the November through April period has been about 7% compared with the average gain since 1990 for the May through October period of about 3%.

Source: Bloomberg, as of October 9, 2021.

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Small caps vs. inflation

US large caps (as measured by the S&P 500) are slightly outpacing US small caps (as measured by the Russell 2000) thus far this year. Will that dynamic persist for the rest of 2021? Some investors might be thinking about ways to position their portfolio for moderate increases in inflation. Among and within asset classes, small caps are the only group to outpace inflation in every decade over the last 90 years. Some investors cite small-cap companies' ability and willingness to more effectively increase prices quicker, relative to larger companies, in an inflationary environment due to being less burdened by layers of management.

Source: Strategas, as of October 3, 2021. Small-cap stocks here are represented by the Ibbotson Associates (IA) stocks, bonds, bills, and inflation (SSBI) total return series.

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Lumber prices down from record

There was a surge in demand for lumber, as homeowners opted for home improvement projects en masse during the pandemic amid a work-from-home boom. Coupled with a supply shortage, this sent prices skyrocketing to record-high levels above $1,500 per thousand board feet in April 2021. While prices are still well above historic levels, they have come down more than 57%. However, some analysts think lumber prices could remain volatile, with upside potential, as homeowners continue on with home improvements over the near term.

Source: FactSet, as of September 28, 2021

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Tech firms repatriating billions to US

Compared with several years ago, the estimated domestic profit shares of some of the biggest American-based companies appear to be moving back to the US, according to analysis from The Economist. On the list are some of the biggest tech companies in the world, including several FAANG stocks (i.e., tech giants Facebook, Apple, Amazon, Netflix, and Alphabet). But not all of big tech has increased its percentage of profit share in the US.

Source: The Economist, SEC: Tax Notes, as of September 19, 2021.

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Leading indicators slow, but still positive

The US Index of Leading Indicators (also known as the Conference Board Leading Economic Index) is a composite of 10 leading indicators, including stock market performance, unemployment claims, new orders for capital goods, and consumer confidence. Proponents of using this indicator to assess the strength of the economy and investing markets point to how it combines multiple data points into a single index—as opposed to looking at a single indicator that might have a narrower scope. The chart below reveals how this barometer has been historically positive since March of this year; however, it has cooled down from the high-water mark reached several months back.

Source: FactSet, as of September 10, 2021.

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Growth stocks on a roll

Many major stock markets around the world are trading near record highs, despite a myriad of concerns—including Delta variant spillover effects, the August US jobs miss to the downside, and several global central banks beginning to wind down some of their support, to name a few. Meanwhile, the ratio of growth stocks to value stocks is at its highest level since November 2020, as growth stocks have made up a lot of ground compared with their value counterparts over the past 4 months or so.

Source: Bloomberg, as of September 7, 2021.

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Sector winners and losers

Health care, real estate, and technology stocks have been the best-performing sectors since the 10-year US Treasury yield peaked on March 31 of this year at 1.74%. Continuing a multiyear trend, energy has been the worst-performing sector. In fact, every sector has produced positive gains since the most recent yield peak except energy.

Source: Strategas, as of August 27, 2021.

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Blip in retail sales amid COVID surge

Investor sentiment took a hit after the dip in US retail sales last month was revealed. Indeed, retail sales fell 1.1% in July, with auto and auto parts down roughly 3.9%. But if you take a longer view, sales of goods have been way above trend in the wake of the COVID-19 pandemic. Of course, the same can't be said of services spending, and the renewed risks of the Delta variant have the potential to prevent that from bouncing back like retail sales.

Source: Census Bureau, Haver Analytics, as of August 20, 2021.