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Sunday, July 25, 2021
Stocks & Shares

U.S. stock futures pointing up amid earnings season

U.S. stock

The index is up 42% over the last year and more than 11% in 2021 alone

U.S. stocks are set for another day on the back of the bull market, with futures pointing up amid a corporate earnings season.

The index is up a staggering 42% over the last year and more than 11% in 2021 alone.

Talking about the recent market gains, strategist Vincent Deluard at broker StoneX points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago.

There have been 12 major bear markets in the last century, according to Deluard, and stock prices never doubled in the ensuing rally after five of them. In the seven cases where stock prices in the post-bear market doubled, it took an average of four years.

There is only one precedent in history for such a rapid doubling, when U.S. stocks doubled between June and September 1932, Deluard says. A 40% correction quickly followed, and then another 100% + rally in a confusing sequence of brutal bear markets and dazzling rebounds which lasted until the battle of Stalingrad turned the fate of World War II.

Another troubling sign is that the recent, spectacular rebound in corporate earnings amid the wider economic recovery from the pandemic hasn’t led to a rise in share buybacks, which are still 30% below pre-pandemic levels, according to Deluard. As a result, the total shareholder yield – buybacks & dividend divided by market cap – of U.S. large-caps is at its lowest level in a generation, Deluard says.

Further to that, individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters.

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