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September 14 – Stock mentions: SPY, EWJ, EWY, ACWI,
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Stocks had a solid showing this week, with the S&P 500 finishing the week higher by roughly 1%. For September the index has risen by over 3%. However, the real star this past week was the Russell 2000, which is now up over 5.5% for the month.
Global Growth Trade
As I have been talking about all week in the member area, the sector rotation that has been taking place tells a tale of improving global growth. The top 5 sectors are all part of a global growth trade, with the semis, energy, industrials, and materials, 4 of the top 5. Financials come in at 2 rising by nearly 6% so far this month. Partially that is because of the rising interest and widening spreads we have recently witnessed. But rising rates can also be interpreted as an expectation that the economy is stronger than previously perceived in August. Subscriber content: Sector Rotation Speak Of A Return To Growth – first two weeks for you to try.
Commodity Strength
Copper
When digging deeper, we can see critical commodities, such as copper, which has recently broken out of a multi-month down, a significant global growth metal. Should copper rise above $2.70 this week, it has the potential to move up to around $2.80.
Iron Ore
Iron ore prices have started to rise once again too, after collapsing in August.
Soybeans
Soybean prices have also been on the rise in recent days, an indication that perhaps China has started to come back into the US markets, as widely spoken about over the past week.
Markets
South Korea
Key export economies stock markets are on the rise. The Korea Kospi rose above a multi-month downtrend and has further to rise before reaching its next level of resistance.
Japan
The Japanese Nikkei is on the verge of breaking out too. Japan, like South Korea, is an export-driven economy.
Emerging Markets (EEM)
The emerging markets ETF EEM is also on the cusp of a significant breakout.
All-World (ACWI)
The all-world ACWI ETF is all nearing a massive break out.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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Fundamentals Still Supportive
When you start pulling all of these facts together, I find it very hard not to be bullish on the equity market. Over the past few days, my view of the equity market has gotten more bullish. I am beginning to believe that we will indeed have a powerful move higher later this year. It may also be the start of the next surge higher in equity prices. Something similar to what we saw in late 2016 through the beginning of 2018. Premium content – The Outlook For Stocks May Be Growing Stronger – Try for the first 2 weeks for FREE! I won’t be insulted if you cancel.
For the first time since the beginning of August, the S&P 500 dividend yield is below that of the 10-Year US treasury. As I have pointed out before these inversions have only occurred on a handful of occasions. Each time it was followed by a massive move higher in equity prices.
Also, just like during past times, the S&P 500 was in a period of sideways consolidation during the inversions. This time has proven no different. Each time the spread between the S&P 500 dividend yield and the 10-year yield began to widen, and return to normal, the S&P 500 broke out and went on a bull run higher.
Not Overvalued
At this point, the S&P 500 isn’t overvalued either, so the case for the markets rising seems fair. Based on data from S&P Dow Jones, the S&P 500 is trading at roughly 16.6 times 2020 earnings estimates for $181.11 per share. Again, this hardly is expensive when considering earnings growth in 2020 is forecast to be around 12.1% over 2019.
When using my model, I come up with similar numbers with an S&P EPS estimates of $180.03 for 2020, leaving the index trading at roughly 16.7. Additionally, I am modeling earnings of $197.65 for 2021, and growth of about 10% growth over 2020. Based on those earnings estimates, I am projecting an S&P 500 target valuation of 3,360 using an earnings multiple of 17.
It would seem that when using the markets as a guide, along with some underlying fundamentals. The markets may be signaling that a significant rise may be on the way. It may mean that a big run-up in the market is only beginning now.
Have a great Saturday
-Mike
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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