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7 charts from the past week that tell an interesting story in markets and investing…
1) Investors Are Behaving as if the Future Has Already Happened
The mania in electric vehicle companies continues…
-Rivian’s ($RIVN) market cap hit $149 billion this week, substantially higher than both General Motors ($91 billion and Ford ($79 billion). Investors are behaving as if the future has already happened, that Rivian (the “next Tesla”) has already become Tesla (a profitable electric vehicle maker with the highest customer satisfaction in the industry). In doing so, they’re paying a multiple on sales that we have never before seen in a company of its size.
-Lucid ($LCID) had $232,000 in revenue during Q3 versus $35.7 billion for Ford ($F). Which company has a higher market cap? You guessed it…
2) Tech Strength Back to 2000 Levels
Technology stocks have mounted an impressive comeback after relative weakness earlier in the year.
The ratio of the Tech sector ETF ($XLK) to the broad S&P 500 is now at its highest level since October 2000.
On the flip side, defensive sectors are being shunned, with the ratio of Consumer Staples ($XLP ETF) to the S&P 500 at its lowest level since September 2000.
3) The Stock Picker’s Bear Market
The S&P 500 hit its 66th all-time high of the year this week and the Nasdaq 100 is on pace for its 13th consecutive positive year.
The largest companies in the indices continue to lead, with Apple ($AAPL) crossing above $2.6 trillion for the first time, regaining its title as the largest company in the world.
Meanwhile, 2021 has been a difficult year for stock picking, with many former growth/tech/IPO/SPAC favorites showing significant drawdowns…
4) What They Say vs. What They Do
A fascinating divergence: US Retail Sales hit another all-time high last month while Consumer Sentiment is at its lowest level in 10 years.
There’s no question consumers are worried about higher inflation, but that hasn’t caused them to reduce spending just yet. Demand for goods/services remains incredibly strong and consumers have been very insensitive thus far to rising prices. If and when that changes, you have a more troubling situation: stagflation.
5) More Evidence of Inflation
Coffee prices hit their highest levels in 10 years…
US Export Prices increased 18.1% over the last year while Import Prices increased 10.7%…
The surge in US inflation expectations continues unabated, rising to their highest levels ever recorded (3.17% for 5-year breakevens).
6) Another Meme Bites the Dust
Remember when Clover Health ($CLOV) became a “meme stock” back in June? It’s now down 81% from its peak and at an all-time low.
7) The 5th Wave
The 5th major wave of covid-19 in the US has begun, and we’ll likely see a significant surge in the months to come (winter, holidays, more indoor gatherings, etc.)…
It is becoming increasingly clear that the Delta variant is simply too contagious to contain. Every country and region will have to take their turn eventually. In the US, the South was hit hard over the summer and peaked in early September. The rest of the country is now on the rise, particularly the Northeast and Midwest.
In Europe, we’re seeing a significant rise across the continent, with many countries (ex: Germany/Austria/Netherlands/Denmark) hitting a new highs in cases.
The good news is that the vast majority of Americans have now either been vaccinated (69% with at least 1 dose) or infected naturally with the virus (my estimate: approximately 50%). That means >80% of Americans have some form of immunity to the virus, decreasing the risk of severe illness, and each subsequent wave will hopefully be less and less deadly.
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And that’s it for this week. Thanks for reading.
Have a great Sunday and week ahead!
-Charlie
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