Churchill Management - Commentary
by Craig Love, on May 14, 2021
- Behind ample support from loose monetary policy and multiple rounds of fiscal stimulus, markets have continued to grind higher since the start of April.
- Rotation continues to be a theme under the hood, with leadership continuing to flip flop between a growth and value story.
- Behind massive stimulus, the early returns for the market rebound came from an increase in the price/earnings multiple. From 2019 to today, the trailing p/e (using operating earnings) multiple on the S&P 500 expanded from 18 to 29, making up some 90% of returns.
- Enter earnings to keep the party rolling. The current earnings season has seen a record 87% percent of S&P 500 companies beating their estimates and has analysts scrambling to revise future estimates upward.
- Concerns over inflation appear to be the biggest investor concern. The topic of increasing input costs has been front and center over recent months as commodity prices have skyrocketed.
- The Federal Reserve is banking that much of the inflation we are seeing will be transitory, the result of supply bottlenecks that should be temporary.
- For now, the market continues to look good. Big Tech bounced back after correcting earlier in the year, but the previous highs have acted as an area of
- Breadth has confirmed the new highs on the S&P 500 and the Dow Jones Industrial Average, showing widespread participation – a sign of a healthy rally.
- As always, we will keep a close eye on these factors and make any changes as needed.
CHURCHILL MANAGEMENT GROUP
Source: Churchill Management Group
** This report is meant to inform the reader of our current market opinion, which we, as professional money managers, use in our decision-making. It should be noted that stock market and bond market data are subject to varying interpretations and any one interpretation will not necessarily guarantee investment success. The information obtained from the sources specified herein and used as basis for our current market opinion is believed reliable, but we do not guarantee the accuracy of such information.