Markets in Focus

Timely analysis of market moves and sectors of opportunity

February 22, 2021: Interest rates rise, but don’t worry: The world isn’t ending

Markets failed to make new highs last week with the S&P 500 closing in the red all four sessions of the shortened week. But the move lower was quite tame and not at all surprising given recent overextended momentum, said Matt Orton, CFA, Director and Portfolio Specialist at Carillon Tower Advisers. However, Orton said, the real story is the continued move higher in bond yields that has pushed the yield on the 10-year Treasury note through 1.3% with little to no impact on equities.

“A big question people are asking is why hasn’t the significant increase in yields really derailed, or more significantly paused, the rally in equities?” Orton said. It’s important, he said, to look at what’s driving the increase in interest rates, which is mostly a rise in expectations of inflation. That means real yields have not changed very much, he said, and that should continue support the overall position of equities.

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If you look at a longer term perspective, yields are still incredibly low.

Also important is looking at the context of where the markets are: Rates are up about 46% so far this year on top of being up nearly 100% from last year’s low, but they’re still below where they started 2020 and lower than levels last February before the pandemic crash.

“If you look at a longer term perspective, yields are still incredibly low,” Orton said. “Pre-COVID, into 2020, into 2019 even, yields were low supporting the story of growth equity, so not that much has really changed when you step back. If you were willing to own growth because rates were low in 2019, they’re a lot lower in 2021, even though they’re up significantly.”

Additionally, Orton noted that earnings season has continued to be incredibly strong with the blended earnings growth rate for the S&P 500 increasing to +3.2% (vs. an expected -9.3%). This would mark the first year-over-year earnings per share growth since the fourth quarter of 2019 (+0.8%) and the highest year-over-year earnings per share growth since the fourth quarter of 2018 (+13.2%). All of this provides support for equities and helps to support multiples despite the increase in yields, he said. “Additionally, earnings expectations for 2021 are probably still too low in my opinion, which would also support equities,” Orton said. Despite all the talk about the yield increase, the Nasdaq Composite Index is still up 6.2% in February, and the S&P 500 is up more than 5%, and small-cap stocks are up almost 10%.

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A lot of these more cyclical parts of the market continue to look appealing from a tactical perspective.

“It speaks to the fact that these areas of the market are still in favor,” Orton said. “Don’t worry. The world isn’t ending because rates are going higher. The overall context of the market hasn’t changed.”

Investor bullishness remains elevated

Orton said the headline of this month’s Bank of America Merrill Lynch Fund Manager Survey sums it all up: The only reason to be bearish is there is no reason to be bearish. On its face, that can be a little concerning, Orton said, but what the survey appears to be capturing “is the fact that the vast majority of economic readings are improving: Expectations for gross domestic product growth continue to improve. Inflation is still benign. Manufacturing and service purchasing manager expectations are increasing.”

American Association of Individual Investors Sentiment

American Association of Individual Investors Sentiment 

Source: Bloomberg, as of 2/18/2021

“Basically, everything that can be going well is going well from an economic perspective, and the momentum of the improvement in those economic indicators is also strengthening,” Orton said. “All of that bodes really well for the market going forward.” Consequently, sentiment is incredibly high and cash levels are at 8-year lows as retail and institutional investors all have increased equity allocations over the past few months. The American Association of Individual Investors’ “bullish” sentiment readings have been elevated relative to the past few years, reflecting this optimism. There has also been increasing consensus around a cyclical recovery.

“This certainly supports the current equity price action,” Orton said, “but it also highlights that some sort of re-set could be good to help fuel longer-term gains.”

Strong market breadth supports a rising equity market

Price action across sectors and market capitalizations likewise supports the upward trend of the market, Orton said. The REVERSE Index, which is simply the S&P 500 but weighted inversely based on market cap, has been making new highs and, most importantly, has been outperforming the S&P 500. In contrast, going into the February peak last year, the REVERSE Index was underperforming. It’s the exact opposite currently, Orton said, with the ratio poised to breakout of a one-year base.

REVERSE Index points to broad market strength

REVERSE Index points to broad market strength 

Source: Bloomberg, as of 2/19/2021

“The fact that the REVERSE Index has been doing so well I think highlights that you’re seeing broader strength across the market space,” Orton said. “There is still room to go. There are still a lot of parts of the market that are doing well.”

Industrials hit new highs, but lag the broader market

Industrial stocks have posted strong performance over the past few months as prospects for robust economic growth continue to improve, Orton said. However, the sector has lagged the broader market. It is the worst performing sector in the S&P 500 year to date after the more defensive consumer staples, utilities, and healthcare. Energy and financials have benefitted most from the reflation trade, including rising commodity prices and Treasury yields, and not surprisingly are the best performing sectors in the S&P 500 so far in 2021. If we continue to see better forecasts around economic growth, Orton said he would expect to see an improvement in relative performance.

Also interesting are stocks tied to the re-opening of the economy, Orton said. Those include casinos and gaming, cruise lines, airlines, and events, concerts, and related services.

“A lot of these more cyclical parts of the market continue to look appealing from a more tactical perspective,” Orton said, “but at the end of the day, don’t ditch growth. Make sure you’ve got balance in the portfolio, and make sure you’ve got leverage down the market cap spectrum as well.”


Risk Information:
Investing involves risk, including risk of loss.

Historically, small-cap stocks have experienced greater volatility than other equity asset classes, and they may be less liquid than larger cap stocks. Thus, relative to larger, more liquid stocks, investing in small-cap stocks involves potentially greater volatility and risk.

Diversification does not ensure a profit or guarantee against loss.

Disclosures:
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, and other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce return.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Carillon Tower Advisers or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professional advisers. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.

Blended earnings combine actual results for companies that have reported earnings and estimated results for companies that have yet to report.

Growth companies are expected to increase their earnings at a certain rate. When these expectations are not met, investors may punish the stocks excessively, even if earnings showed an absolute increase. Growth company stocks also typically lack the dividend yield that can cushion stock prices in market downturns.

The S&P 500 Index measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 75% of the investable U.S. equity market.

The Nasdaq Composite Index is the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange.

The Bank of America Merrill Lynch Fund Manager Survey is a monthly canvass of the views of about 200 mutual and hedge fund managers around the world.

The American Association of Individual Investors Sentiment Survey reflects answers offered each week by AAII members to the question: What direction do they feel the stock market will take in the next six months? Answers are sorted into bullish, neutral, and bearish categories.

The REVERSE Index reflects the performance of the components of the S&P 500 with the smallest market capitalizations. It does this by assigning the lowest weights to S&P 500 stocks with the highest market capitalization.

 

 


CTA21-0117 Exp. 6/22/2021



February 16, 2021: Volatility low despite bubble fears

Last week saw fresh highs across not just U.S. indices but globally as well, said Matt Orton, CFA, Director and Portfolio Specialist at Carillon Tower Advisers. The FTSE All-World Ex-U.S. Index surpassed its 2007 highs, thanks to the best market breadth in six years. The Russell 3000® Index just saw 93% of components above their 200-day moving average, a level only surpassed in September 2003. Along with these new highs, investors are increasingly asking whether the market is in a bubble set to pop and what might be the catalyst.

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Earnings are critical for supporting the market and should not be overlooked.

“I would note that it’s historically rare to see a meaningful top without a breakdown in breadth first, and we have just the opposite right now,” Orton said. “I continue to believe that equity markets, broadly speaking, are not anywhere near a bubble, though there are certainly pockets of speculative excess – some of which have already popped and crashed back down to earth.”

Earnings have been strong but largely overshadowed by the “Reddit Rebellion” and the rollercoaster ride many targets of the social media site’s users have endured; however, Orton said that is missing the forest for the trees. Earnings are critical for supporting the market and should not be overlooked. With 74% of S&P 500 companies reporting results, 80% have beaten earnings per share (EPS) expectations and the results have been so strong that the index has returned to earnings growth. The blended earnings growth rate now stands at +2.9%, well ahead of the -9.3% decline expected at the end of the fourth quarter of 2020. This marks the first time that the S&P 500 has reported year-over-year (y/y) earnings growth since the fourth quarter of 2019 (+0.8) and the highest y/y earnings growth since the fourth quarter of 2018.

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...there is still room for further volatility compression, which could provide additional support to the market.

In this context, it certainly makes sense to see the market continuing to move higher. The Chicago Board Options Exchange Volatility Index (VIX) also continues to make lower lows, and it closed below 20 on Friday, its lowest level since the COVID-19 pandemic started. It is worth noting that the VIX curve is sharply upward sloping and there is still room for further volatility compression, which could provide additional support to the market. On the flip side, it also reflects increased uncertainty just a few months out, perhaps highlighting that the market is indeed in stretched territory and any consolidation wouldn’t be unexpected. The University of Michigan Consumer Sentiment data released on Friday was also a bit concerning, with consumer confidence falling again. It seems that increasing inflation expectations was the culprit this time. Should this trend continue, it will pose a challenge to the U.S. Federal Reserve’s (Fed) campaign to generate inflation and growth.

Volatility at lowest since start of pandemic

Volatility at lowest since start of pandemic 

Source: Bloomberg, as of 2/12/2021

However, one pocket of the market Orton believes looks overextended – maybe even bubbly – is microcaps. The Russell Microcap Index was up over 4% last week alone, putting its YTD gains at 28.2% and its gains since the market bottom at nearly 160%! Microcaps are outperforming all other market capitalizations by wide margins, and small caps have been on quite a tear lately, too. On one hand, it’s easy to say this doesn’t matter too much, since it is a small part of the market without much institutional presence. Microcaps have also underperformed the S&P 500 and the Russell 2000® Index for the past 18 years, so odds are this bout of outperformance is unsustainable.

Extreme performance in microcaps

Extreme performance in microcaps 

Source: Bloomberg, as of 2/21/2021

On the other hand, Orton said, it does matter. It whiffs of speculation, near-reckless risk taking and bubble chasing, which is not generally associated with a sustainable market trend. It also distorts benchmarks and presents challenges to active managers who follow fundamentals and do not dabble in bubble chasing.

“To me, this is a reminder that the marketplace is awash in liquidity that rivals anything we have seen in the past, which is supporting valuations up market capitalizations, and forcing investors to be in equities,” Orton said.

The run in microcaps is a reminder that there will likely be violent air pockets in the future. Orton encourages investors to remain biased to the upside and be ready to exploit any downside in the market.


Risk Information:
Investing involves risk, including risk of loss.

Historically, small-cap stocks have experienced greater volatility than other equity asset classes, and they may be less liquid than larger cap stocks. Thus, relative to larger, more liquid stocks, investing in small-cap stocks involves potentially greater volatility and risk.

Diversification does not ensure a profit or guarantee against loss.

Disclosures:
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, and other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce return.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Carillon Tower Advisers or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professional advisers. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

The FTSE All-World Ex-U.S. Index is designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

The Russell 3000® Index measures the performance of the 3,000 largest U.S.-traded stocks, which represent about 98 percent of the total market capitalization of all U.S. incorporated equity securities.

The S&P 500 Index measures change in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 75% of the investable U.S. equity market.

Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.

Blended earnings combine actual results for companies that have reported earnings and estimated results for companies that have yet to report.

The Chicago Board Options Exchange (CBOE) Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors’ sentiments.

The University of Michigan’s monthly Survey of Consumers is used to estimate future spending and saving.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8 percent of the total market capitalization of the Russell 3000® Index.

The Russell Microcap® Index consists of the smallest 1,000 securities in the Russell 2000, plus the next 1,000 smallest eligible securities based on a combination of their market capitalization and current index membership weight. The Russell Microcap includes tradable securities that meet exchange listing requirements, so over-the-counter stocks and pink sheet securities are excluded.

Frank Russell Company (Russell) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this communication.

 


CTA21-0088 Exp. 6/16/2021



February 8, 2021: Markets take heart in stronger than expected recovery

U.S. equities moved higher last week, posting their strongest week since November with the S&P 500 and Nasdaq climbing to record highs. The risk-on move also was seen in credit markets, where high-yield spreads in the Credit Default Swap Index broke 2021 lows on Friday, said Matt Orton, CFA, Director and Portfolio Specialist at Carillon Tower Advisers. While most economic data reports highlighted a stronger than expected economic recovery, Orton said even bad news was good news last week with a weak jobless report giving investors more hope that Congress would pass a big fiscal relief package. Earnings season continues this week, and Orton said it should take center stage as manic trading driven by retail investors fades. Fourth-quarter results have been quite strong but have largely been overshadowed, and Orton said he hoped that will start to change.

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There are definitely expectations that inflation is going to be coming back into play in the United States.

Small caps and value-oriented sectors outperformed last week as both parts of the market would be particularly supported by increased fiscal spending. Small caps were up 7.7% last week, bringing their year-to-date gains to 13.1% (and that’s after gaining 31.3% in the fourth quarter). Democratic lawmakers continue to take a dual-track process toward the COVID relief bill, prepping the ground for reconciliation while negotiating with 10 moderate Republican senators. The process is likely to slow on the Senate side this week with the start of former President Trump’s second impeachment trial, but Orton still expects at least a $1 trillion COVID relief bill to pass in March. While the Russell 2000® Index is tactically overextended, Orton said he continues to see value for small caps as they should continue to benefit from the economic recovery and improving data.

Small companies continue to lead

Small companies continue to lead 

Source: Bloomberg, as of 2/5/2021

Interest rates, breakevens on the rise

Orton noted that 10-year Treasury yields have continued to climb and started the week at 1.18%, up about 30% year to date but still meaningfully below where we started 2020. Additionally, the 10-year U.S. breakeven inflation rate – a measure of what market participants expect inflation to be over the next 10 years – hit its highest level since 2014, and the 30-year Treasury yield rose to the highest in nearly a year.

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If we continue to see rates rise fairly modestly – it’s been a pretty gradual rise – that’s certainly not likely to spook equity markets.

“There are definitely expectations that inflation is going to be coming back into play in the United States,” Orton said. While Orton said these moves are certainly based on enthusiasm around the economic recovery, a sharp rise in commodities also plays an important role. Either way, Orton said he doesn’t see changes happening at a pace that gives him cause for alarm.

“I think if we continue to see rates rise fairly modestly – it’s been a pretty gradual rise – that’s certainly not likely to spook equity markets,” he said.

Orton said he also saw volatility trends supporting a move higher in risk assets. The Chicago Board Options Exchange (CBOE) Volatility Index, or VIX, is nearing its lowest close since the COVID crash that began in February 2020.

That said, “there’s still some uncertainty longer term,” Orton said. “Longer-dated VIX futures are still quite elevated. Part of that, I think, is a supply issue and part of it represents future uncertainty. That says to me there is still room for further volatility compression, which can help support markets should we continue to have positive data and earnings continue to come in strong.”


Risk Information:
Investing involves risk, including risk of loss.

Historically, small-cap stocks have experienced greater volatility than other equity asset classes, and they may be less liquid than larger cap stocks. Thus, relative to larger, more liquid stocks, investing in small-cap stocks involves potentially greater volatility and risk.

Diversification does not ensure a profit or guarantee against loss.

Disclosures:
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, and other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce return.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Carillon Tower Advisers or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professional advisers. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

The breakeven inflation rate reflects what market participants expect inflation to be in the next 10 years, on average. It is calculated using 10-Year U.S. Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities.

A credit default swap is a financial derivative or contract that allows an investor to “swap” or offset a credit risk with one owned by another investor. Credit default swaps act like insurance policies in the financial world, offering a buyer protection in case a borrower’s defaults on credits such as corporate bonds, mortgage-backed securities, municipal bonds, or emerging market bonds.

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.

The Chicago Board Options Exchange (CBOE) Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors’ sentiments.

The Credit Default Swap Index (CDX) is a benchmark financial instrument made up of credit default swaps issued by North American or emerging market companies. The index includes credits from about 125 different companies that are categorized either as investment grade or high yield. The CDX also is a tradable financial product that investors can use to gain broad exposure to the market for credit default swaps.

The Nasdaq Composite Index is the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange.

The S&P 500 Index measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 75% of the investable U.S. equity market.

The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92 percent of the total market capitalization of the Russell 3000® Index.

The Russell Midcap® Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8 percent of the total market capitalization of the Russell 3000® Index.

The Russell Microcap® Index consists of the smallest 1,000 securities in the Russell 2000, plus the next 1,000 smallest eligible securities based on a combination of their market capitalization and current index membership weight. The Russell Microcap includes tradable securities that meet exchange listing requirements, so over-the-counter stocks and pink sheet securities are excluded.

Frank Russell Company (Russell) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this communication.

 


CTA21-00088 Exp. 6/8/2021



February 1, 2021: Strong earnings meet heightened sentiment

The market finally took a pause despite record earnings results from mega-cap tech companies, said Matt Orton, CFA, Director and Portfolio Specialist at Carillon Tower Advisers. While last week was the worst week since October, the S&P 500 was down -3.29% and the Russell 2000® Index was down -4.38% – hardly a re ason for concern. If anything, the “worst week” headlines highlighted the frenetic upward pace of the market over the past few months.

“The fact that these mega-cap tech names couldn’t push higher even on the strength of good results shows how overextended the market is,” Orton said. “That said, it’s incredibly positive to see such strong results in the face of elevated expectations. My long-term bias is still positive for U.S. equities.”

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I believe the market will rebound this week, followed by more lows, and hopefully we will see consolidation as we move forward.

With 37% of the companies in the S&P 500 having reported results, 82% are reporting a positive earnings-per-share surprise and the blended earnings decline stands at -2.3% (vs. the -9.2% expected as of 12/31). Analysts will be parsing the next set of earnings results this week as more mega-cap tech companies report. “I believe the market will rebound this week, followed by more lows, and hopefully we will see consolidation as we move forward,” Orton said.

The short squeeze retail trading madness that has consumed financial media is distracting from good earnings news, Orton said. “The headlines are interesting and absolutely worth following, but this is something we’ve seen playing out over the past months in other parts of the market, namely in the smaller-cap space,” Orton said.

Shares of companies related to electric vehicles, solar power, and other companies touching clean energy have been seeing “eye-popping gains,” Orton said. The iShares S&P Global Clean Energy ETF is on course for its 10th monthly advance – the longest winning streak since 2008. It’s hard to say whether these gains will last, but we may find out in the near future as trading volume in clean energy names is finally starting to slow.

“There is tons of capital looking for a purpose in the market, and I think that has helped fuel what we’ve seen on the retail side of things,” said Orton. “But it also highlights the fact that long-term investors are looking for opportunities to deploy capital into high and rapid growth, which they can’t get in many other parts of the market.”

Orton doesn’t see a very favorable entry point yet given that sentiment still remains elevated. He advises investors to “stay out of the fray” and wait for more evidence of a reset in sentiment. Signs of a reset include the return of strength in large-cap names, some normalization in the growth-value dynamic, and a trend lower in heightened levels of volatility.

Rally in small clean energy stocks

Rally in small clean energy stocks 

Source: Bloomberg, as of 1/29/2021


Risk Information:
Investing involves risk, including risk of loss.

Historically, small-cap stocks have experienced greater volatility than other equity asset classes, and they may be less liquid than larger cap stocks. Thus, relative to larger, more liquid stocks, investing in small-cap stocks involves potentially greater volatility and risk.

Diversification does not ensure a profit or guarantee against loss.

Disclosures:
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, and other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce return.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Carillon Tower Advisers or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professional advisers. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

Blended earnings combine actual results for companies that have reported earnings and estimated results for companies that have yet to report.

The price-to-earnings ratio (P/E) measures a company’s current share price relative to its per-share earnings.

Short sellers bet that the price of an asset will decline in value. To profit off that drop, they agree to buy shares of the asset at a predetermined price on a set expiration date. In the meantime, they borrow shares of the asset to sell at the prevailing higher price with the expectation that they will be able to buy them later at the lower price attached to the expiration date.

A short squeeze refers to what happens when the price of an asset rises sharply and forces short-sellers who had bet that its price would fall to buy it instead in order to avoid incurring even greater losses. In turn, those purchases put more upward pressure on the asset price.

The iShares S&P Global Clean Energy ETF seeks to track the investment results of the S&P Global Clean Energy Index, an index composed of global equities in the clean energy sector.

The S&P 500 Index measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 75% of the investable U.S. equity market.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8 percent of the total market capitalization of the Russell 3000® Index.

Frank Russell Company (Russell) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor, or endorse the content of this communication.

 

 


CTA21-00074 Exp. 6/1/2021