Here Comes Earnings Season

Ryan (00:00):

Hey, everybody. Welcome to the latest LPL Market Signals podcast, Ryan Detrick and Jeff Buchbinder. So Jeff I'm here this week because we are recording this in person obviously, but next week, you're going to miss me. Aren't ya? I'm beach bound for the Dominican Republic. How are you possibly going to do this podcast without me?

Jeff (00:24):

Well, I guess I can say we've done it without you a couple of times before and by all accounts went just fine. So it won't be as good without you, but we'll still put a good show out there for you.

Ryan (00:37):

I would argue in some cases it probably was better. So that's right. So Emily and I are heading down. So we're recording this, let's see Tuesday morning. So if all goes well, Wednesday morning in 24 hours, we'll be on a flight to the Dominican Republic for our 15 year anniversary, which is actually on the 14th. But so we're flying down there and we just, Jeff and I were just talking to me for his podcast. We're flying my mother-in-law in tonight from Cincinnati to watch the kids for the four nights we're gone. So hopefully she gets here with no, no issues, but we'll, we'll see. And you know Jeff,  something I learned, I guess, on a passport, you know how it's got an expiration date? I mean, you've, I assume you have a passport, right? Sure. Yeah. So it's got an expiration date, what someone told me and  I need to verify this, apparently, like, so let's say, it says December of this year, December 21st, that's not right. It actually expires six months before the expiration month on your passport. Apparently this has gotten many, many people over the years. I'm like, well, yeah, that would probably get me. So maybe with listeners that you let me know for sure. But I heard from a pretty credible source that gets people all the time. That makes no sense. Does it?

Jeff (01:51):

It doesn't make sense, but I have heard that too. Okay. I didn’t know exactly what the lead time was, but I knew it was at least a couple of months.

Ryan (02:00):

Apparently  six months. So it's just, if you’re going somewhere double-check that, and a lot of good vacations have been ruined, but anyway, let's not talk about things that are ruined. Let's talk about things that are happening and shaking. So this week in the LPL Market Signals podcast, Jeff and I are going to discuss a little bit about Washington, Washington, kick the can. If you listened a week ago, we said, they're probably going to kick the can. We'll still, we'll still dive into that. Really going to spend a good amount of time focusing on earnings. Amazing you blink it's earning season, third quarter earnings are starting up literally like as we speak. So Jeff as our earnings guru is going to see what his crystal ball tells us about earnings season. They're going to wind things up, talk a little bit about little. I get so excited.

Ryan (02:37):

I stuttered there. A little bit about last week's jobs miss and then some other economic data that's out there. So, so Jeff, again, let's just get into it. Washington kicked the can. 79th time we've increased the debt ceiling since 1960. 39 of those, What is number? Well, let’s  put it this way more times out of Republicans. Forget all of a sudden, but there've been more Republican presidents that have kicked the can than Democratic presidents. Every president, since Hoover now has increased the debt ceiling. You said a week ago, you expected it to happen. I mean, any other kind of thoughts as we kind of digest what this means to December 3rd as we kick the can to them?

Jeff (03:22):

Yeah. I mean, we're right back where we started. We're going to have to kick the can again. So, you know, that might be January because they can use extraordinary measures, move some dollars around and you know, still pay the bills until January. So we've got a little bit of breathing room and that allows the Democrats to focus on their agenda. To get the  two massive infrastructure packages passed. If they can. We are hearing that the human infrastructure, you know, with the social programs is being scaled back significantly. That's what we in pretty much every policy watcher on Washington expected. But it'll be interesting to see just where that that number lands. So bottom line, don't pay attention to the debt ceiling. It's going to be kicked again. It doesn't really matter so much at this point, how it gets done. But neither party is going to cause the U.S. to default on its debt. It just won't happen.

Ryan (04:18):

Yeah, that would be a, a rough stain on, on any politician if that were to take place. Remember in 2011, they waited until two days before the actual day, I guess when the government was supposed to run out of money and that was close enough for the S&P to downgrade the U.S. debt. I know a lot of us remember that it came out. I think I said they tried to pull a fast one, like at 4:30 on a Friday, that downgrade came out and futures just crash. Coming the next Monday, futures crash. I believe we had like a 19% correction in only four or five days. A lot of our more than 19,000 LPL advisors, we didn't have this many back in 2011, but I know a lot of you remember that was during our big focus conference, our annual conference in Chicago when a lot of people had to do some work because the market was crashing.

Ryan (05:09):

But what I'm getting at is I think Washington understands we shouldn't wait until two days before, we need to do something sooner. Now, Barry Gilbert on our team, Jeff, put together a really nice piece, Weekly Market Commentary, talks about a lot of these concepts, he answered actually 13 common questions as it pertains to kind of debt and the debt ceiling. I want to dig a little bit more in. So if they kick the can, I believe they can maybe do reconciliation. Do you think it will be with reconciliation and, and you can only use reconciliation a couple of times a year, right? So kind of how does all that fit in. I mean, this is, this is politics, right? Do we use it? Do we not? Do we get Republicans? You know, what's your take on this?

Jeff (05:46):

Yeah, it's looking like the Democrats will use reconciliation to do this. The Republicans seem to be standing firm until the Democrats do it themselves. Cause they of course have the majority's in all the branches of government. If they do reconciliation to raise the debt ceiling and they still can use reconciliation again to pass the infrastructure package, the second one, the $3.5 trillion package. But then they'd have to get the hard infrastructure package done via a bipartisan support. And they do have Republican support in the Senate for that, that's a $1.2 trillion hard infrastructure package. So we'll probably get a total of around 3 trillion when all is said and done. But you know, I don't think there's any reason not to use reconciliation if the Republicans continue to stand their ground.

Ryan (06:39):

Yeah. Now I guess let's see it's called the BBB right. Build back better. That's the human infrastructure. I believe I saw it's 2,456 pages. I don't know if that's normal. I mean, it is, is we're talking trillions of dollars. So I guess you need to have a lot of pages. How many of those pages have you read Jeff, you and I are quote unquote “experts”. You read any of those 2,456 pages yet.

Jeff (07:06):

I brought some excerpts that have been cited by third party policy analysts. How about that?

Ryan (07:13):

That's the answer. I believe me, I've read. I don't think I've read one page of it to be honest, but I've read a lot of third-party research as well. So got a playful.  I assume that's probably one of the bigger pages to anything we've ever done, but also it's also one of the biggest trillions of dollars we've ever potentially spent. You know, and Jeff, I mean, one other part of this I guess, is higher taxes, right? Do you have to finance this somehow? Now we're going to talk about the economy here in a little bit. So I'm not even sure if I want to dig too much into this, but the Atlanta Fed now is saying, Atlanta GDP. Now the Fed, is saying like 1.2% GDP in the third quarter, we're seeing some weak-ish. How in the world can we increase taxes if the economy is starting to show some signs of weakness, right? I mean, this is a question we get every single day from our more advisors and our clients.

Jeff (08:02):

Well, I would say that the Democrats need some of this to pass, right? This is their signature achievement of the first two years of the Biden administration. They you know, there's a decent chance that they're going to lose the House what could, what could lose the Senate, but certainly decent odds based on history that the House switches parties. So they really, they really need this, regardless of how big it is. So I'm sure it's difficult to raise taxes in you know, a soft economy, but certainly we, and most economists out there,  think we'll get a little bit of a bounce in the fourth quarter. This is temporary. This is largely COVID related. And so, and, and frankly, one, one, 2% for a soft quarter, it's pretty darn good, actually, right? You annualize that out. It's not terrible. So growth will get better and it's probably not enough to stop the Democrats from moving forward.

Ryan (09:00):

Great points there. We’re going talk more about the economy soon, but I think it is more of a soft patch right now with likely a stronger economy as we head into next year and into 2022. That's why to help finance all of this, likely higher taxes are coming. So Jeff, that good discussion there again, please guys read the Weekly Market Commentary where we answered 13 common questions about debt and the debt ceiling. So Jeff, this one hurts, but I'm going to do it.  It's taken me a couple days to get over this. Did anybody see the Cincinnati Bengals game on Sunday? For the first time in NFL history, there were five consecutive missed kicks with less than two minutes to go in the games, less than two minutes in plus overtime. All right. Two of them by the Bengals kicker,  three of them by the Packer's kicker. Literally the Cincinnati Bengals kicker and the special teams celebrated one of the misses. Now, they thought it went in, they were dead wrong. I've never seen anything like it, it just, I think it took years off my life. You think you're going to win? You think you're going to lose. Just frustrating all around. I know Jeff, your Chiefs have struggled. We don't need to go there. You and I are just, it was, it was a rough Sunday. Was it not?

Jeff (10:10):

Very rough. Yeah, I still think you know, both teams have positive outlooks. There's a lot to be excited about for the next, you know, year or two, certainly at least, but tough, tough weekend. No doubt.

Ryan (10:24):

I mean five missed. I don't care if you kick in 60 yards in a row, the way these guys are so automatic, like that's just amazing to miss five in a row when, when they, any, one of them could have literally won the game. But anyway, my Bengals are still hanging in there, but that one, that was a rough one. Aaron Rodgers got us again. So enough personal stuff, Jeff, let's focus a little bit on third quarter earnings, which are here. We, we joked literally the last two quarters. I know I've got these numbers here in front of me. Let me give me one second. I'll find it. I think, okay. At the start of the first quarter, earnings were expected to be up 24%, ended up being up 52% year-over–year. Second quarter expected to be up 63%, came in up 90% in the second quarter. And now this quarter is expected to be about 28%. Jeff, we're going to see another 25, 30, 30% beat, or what, what's your take on this quarter?

Jeff (11:19):

No I mean, I was surprised last quarter by how much corporate America blew away estimates, but this quarter they're just too many macro headwinds. And frankly, we also have estimate data, you know, in recent months, that point to less upside. So it's not just because there's all these headlines about supply chain challenges. And, you know, we've had some profit warnings from some big name companies that are, you know, certainly Nike a, name we all know. FedEx, Sherwin-Williams. I mean, we know airlines are having trouble. You know, there's a number of industries out there that are, that are seeing challenges, right. So, but if you forget about the headlines and just look at what's happened to estimates recently. 

Ryan (12:11):

I believe we call that peeling back the onion. Peeling

Jeff (12:13):

Back the onion, that’s right. Maybe we should rename Market Signals, peeling back the onion podcast, although it doesn't quite have the same cache. So, you know, we, you know, over the last couple of quarters, you look at estimates heading into earnings season and they were up significantly, you know, six, 7% plus. This quarter, they've only been up high twos. So that's one piece. Then you just look at the ratio of companies giving good guidance versus bad guidance. And it's also worse than the last couple of quarters. It's still pretty good. So we still think we'll get average upside, but it's not as good as what we've seen the last couple of quarters. So consensus is, just checked this morning, 28% year-over-year earnings growth, according to Factset, that we could make a run at 40, but that would frankly be amazing given the headwinds out there on the cost side.

Jeff (13:13):

And frankly COVID affects demand too, because you know, this, this happened with Nike, right? If you can't get the goods, you can't sell them. Right. So there's a demand piece of this, and there's also a supply piece which affects margins. It's more expensive for a variety of things we've seen. We've been talking about inflation pressures here on this podcast for a number of months. It’s going to be tricky, but you know, maybe something in the mid-thirties would be reasonable to expect based on history, let's call it a six to eight percentage point upside surprise, I think is probably where we'll land.

Ryan (13:51):

Obviously if we land there, that'd be nice. Sam Stovall, friend of the show from CFRA. According to Sam, he said since 2009, 47 of 48 quarters beat the estimates, right? So the estimates right now, 28, you go with history probably going to come in a little bit higher than that. Sam pointed out only the second quarter of 2020, which obviously was COVID was the only quarter that didn't beat estimates. According, at least to Sam there. So history does say probably going to beat those estimates. Now, Jeff, when I look back at who's supposed to do well, I see materials up 90%, industrials up 75%, real estate up 56%. Those three all feel kind of like a reopening play. On the downside utilities down 3%, consumer discretionary up 14, staples up three, healthcare up 12, financials up 12. Is it as simple as that? We're seeing most of the big moves are going to come from the beaten up areas from a year ago. Cause it's all about the reopening.

Jeff (14:50):

Absolutely. Right? The sectors that struggled the most during the pandemic, you just certainly listed some of them, natural resources

Ryan (14:59):

and industrials. Those are the sectors that are seeing the biggest rebounds off of those Q3 2020 lows. Now, correct me if I'm wrong last quarter, wasn't revenue up like 24 or 25%, an all-time record. It was something like that. Right. I know it was all-time record, right? Wasn't it, something like that.

Jeff (15:17):

It was, it was an all-time record in the low twenties. And certainly, you know, we'll see a slowing revenue growth this quarter, but just like, we'll see slowing earnings. I mean, you just can't replicate the year-over-year growth off of the lockdowns of Q2 2020, right? So, you know, don't focus too much on slowing growth, you know, 90% to 30 or 90% to 40, these are still really strong growth numbers. They're just distorted a little bit by what was going on in the summer of last year.

Ryan (15:49):

Absolutely. I mean, so that's what I was getting at, the earnings are big, that's great. Right. But you want to see revenue up to, right? You want to see, want to see kind of both of them playing along. Revenues expect to be up about 14% in the third quarter, which would obviously be a really solid number. If maybe you can get a couple percent above that let's call 15, 16 or so and get mid 30 earnings. That's not too bad. I had one other thing I wanted to say here, Jeff, give me one second. I guess yeah, here we go. So, you know what, one of the things, obviously we're going to probably talk a lot about the next couple of weeks. Okay. Earnings numbers are one thing, but it's what corporate America is saying about the supply chain issues and about inflation, kind of the things we've been talking about literally for feels like a well over a year now.

Ryan (16:28):

Now here's my question to you, Jeff, The Economist recently had a cover story that said “The Shortage Economy".  Barrons had one called “The Big Cargo Crunch”. We've talked on this, it's called Market Signals for a reason because we're looking for signals of the market. When things are on the cover of magazines, I have to think a lot of that is probably priced in, I guess, we'll see where corporate America says, but do you think we're peak knowing its peak shortage everything. I mean, when I see these cover stories, that's kind of where I lay. What do you think corporate America will say in the Q&A sessions of these earnings seasons or these earnings confessions that they have, I guess we'll say.

Jeff (17:06):

Sure. It probably is peak shortages, but we might stay near the peak for a couple more quarters, right? I mean each, each material or each, you know, industry, in terms of labor, has its own unique issues. And so, you know, building a semiconductor plant takes a lot longer, turning on a well that's already, there is, is, is a little bit quicker of course. And you know, putting people back into services jobs that are reopening, you can do quicker. So, you know, it's there's, there's, it's a multi-speed recovery, right? So you know, maybe, maybe two more quarters is about all we need to clean up most of this, but there'll be certain segments that will be struggling, frankly, with some of these shortages for even longer. That's why you hear a lot of folks talk about maybe this inflation isn't transitory, maybe in the second half of 2022, we're still, you know, looking at elevated prices for a lot of these you know, components and various inputs  for goods across the economy.

Ryan (18:14):

So remember I I've got my hot tub, right. And I mentioned on the show before that I, my cover had a leak after two years, two and a half years in the South Carolina sun, it just cracked. And when it rains, some water would get in the cover and then the cover would weigh like a thousand pounds. And I hurt my back trying to open it. Anyway, so I ordered the new cover. They said, it'd be about six or no, sorry. One place had like 22 or 23 weeks. Another place told me about eight weeks. About eight weeks is like right now. I called them. And they said, we have no idea when it will be here. It  could  still be here tomorrow. But that's just the real world supply issues that we're dealing with for sure. Let me see. I don't think, you know, Jeff, those are really, I guess what I wanted to talk about for earnings season. Anything else you want to talk about before we move forward?

Jeff (19:02):

And just look for the guidance to be a little bit more cautious than it's been the last couple of quarters that probably, you know, again, the supply chain challenges are certainly going to be impacting companies longer. And that likely means it'll be tough for stocks to react positively, right? Maybe the whole market will do okay. But this could be a source of some volatility as the market adjusts to a more muted near term outlook. So look for that.

Ryan (19:30):

Yeah. You know, and I remember what I wanted to say. You were talking about the supply chain issues. I was likely going to be a couple more quarters, probably in a lot of cases, maybe even longer, in some cases. We do have some positive news. There was a couple of different reports that a plant in Ho Chi Minh City. I don't know where that is exactly, but they make a lot of semiconductors, I can tell you that. It's a plant that is, I guess, Intel and Samsung is opening up for full operations by the end of November. And Toyota Motors is looking to come back on, restart  by December. So those chip shortages and other shortages it's clearly still impacting, but it's nice to see some major companies announcing that they're going to start at least looking to start to open things back up.

Ryan (20:14):

So Jeff, now we're going to play a new game. It's called who you got. Have you seen the billionaire battle between Elon Musk and Jeff Bezos. Bezos had a tweet about when Barron’s had a cover story called “Amazon Bomb”. I believe it was May of 99. Just talking about, you know, like the name would suggest, some pretty bearish things about why it wasn't going to work. And he said, listen, this is great. I mean, Jeff Bezos said, listen, and be open, but don't let anybody tell you who you are. This was just one of the many stories telling us the ways we're going to fail. Today Amazon is one of the world's most successful companies, it has revolutionized two entirely different industries. Elon Musk tweeted out a silver medal. That was his reply. Cause he's the second richest man. I don't know. I think it's kind of funny when billionaires fight. Who do you got in this one, Jeff?

Jeff (21:04):

It's not a silver medal for anything space-related?

Ryan (21:09):

Yeah.

Jeff (21:10):

Well we didn't add any color to that.

Ryan (21:12):

No, that's a good point. Now he did not. And I guess that's a good point though. The way it was broadly assumed was because he's the second richest man, but maybe it's a space thing. Clearly these guys have super egos, I guess that's kind of what takes you to be driven to do what they have to do. I personally like Bezos a little bit more if you ask me, but I thought it was pretty funny that he got the silver medal. Do you want to take sides in this by chance or not? I'm taking Bezos. I just liked him a little more. What do you think?

Jeff (21:42):

We want to stay balanced on this podcast? So I'll just say Elon Musk did a nice job on Saturday Night Live and leave it at that.

Ryan (21:49):

Yeah, he did. I Musk wins on Twitter. I mean, he loves mixing it up because I was looking for this tweet and the stuff he says on Twitter, like literally, you could tell he's the world's richest man because he just doesn't care. He just says, you know, the stuff he was saying about funding a 420 a long time ago with Tesla and different things. I mean, you know, okay, come get me, you know, like I'm the world's richest man. Anyway, that kind of funny, kind of fun, little stuff going on with the world's billionaires arguing over things that maybe don't matter as much, but so let's finish it up. Jeff, we're going to talk about the economy now and another real-world example. I'm back by the way. Remember my phone died, I think three weeks ago today and I had to go to the store.

Ryan (22:27):

Verizon. I couldn't find a phone, the phone, I'm a Google guy. Right? I want my Pixel, I couldn't find a Pixel anywhere. So I had to go with a Samsung. Let's just say I did not like the Samsung very much. And I realized I could order a Google phone through Google, show up two days later, took it to Verizon. Now I'm back with my Google Pixel 5. I absolutely love it. It's just I'm so happy because I felt some pain when I was trying to use a different phone. I didn't know what I was doing, but that's just a real-world example. My daughter, she put her phone down, she has like an Apple something, I don't know. And put her phone down and broke it apparently. So I had to take her to go get her. So now she's got like one of those pro thirteens, you know what?

Ryan (23:04):

We went to two different Verizon stores, literally nobody's got phones. We had to go to Best Buy, to buy a Verizon phone through Best Buy. All I'm getting at, these are the real world examples that we're all dealing with continually where just common things a couple of years ago, just go get a phone. That's no big deal. Now you can't find them. You have to go to certain spots. So that kind of leads to that supply chain discussion we kind of already had, but Jeff, I want to now move forward to the jobs number on, I guess it was last Friday, September jobs number. Oh my goodness. I'm going by memory is supposed to be 500,000 remember. It came in short. Do you remember exactly the number it came in, Jeff? was it

Jeff (23:42):

188? 194.

Ryan (23:43):

Close enough for government work, not bad. You know, big miss. I mean, you've had a couple of days to think about it. Are you worried about that big miss that we had on, on Friday?

Jeff (23:52):

No. I mean, you know, again, we’re going to get this economic burst here as the last phase of the reopening takes place. So you know, we, the survey takes place in mid-month, right? And so in mid-September the economy didn't really have enough time to bring the labor supply back. Right. You know, kids going back to school, so more parents can work and you know, maybe a little bit less of a drag from COVID and the supplemental unemployment benefits went away. Right. And so these are things that we think would, would help the labor supply. That's probably coming next month, right? The next jobs report. So it would be a mid-October survey. In fact, that survey wraps up here and just, just a few days  we'll probably see a pickup. Also keep in mind that we had very positive revisions, right?

Jeff (24:43):

So while the, you know, September number wasn't great the August revisions were really strong. And then lastly, that weak number, the market didn't care, right. Just almost ignored it. Right. Which was good. Cause you know, obviously weak data can sometimes cause stocks to fall. The other factor is that you had distortions from seasonal adjustments, right? A lot of it in the education sector. So you get the, you know, the jobs number comes in and then the government essentially adds a seasonal adjustment. So it's more comparable to the year ago, period. That caused  basically caused a job shortfall for this month. So that's why the market ignored it. And we see better days ahead.

Ryan (25:31):

I think the key concept again is how does the market react to it? Right. Okay. Bad news is quote unquote it's bad news. The market was like flat on Friday, 10 year yield was like flat, yields dropped initially, 10 year yields still flirting with up over 160, which historically is really low, but it's well off those lows that we saw recently. I mean, I saw just earlier this week, Chinese, you want to go around the globe here. Chinese yields actually had a big move higher, wouldn't it be something with you know, all the talk about the trouble in China with Evergrande. If that like marked the lows of the slowdown in China. Now we're starting to see some acceleration. By the way, that podcast Jeff, that you and I did on Evergrande and we compared it to, well, we didn't compare it to Bear Stearns.

Ryan (26:11):

We asked the question, is this like another Bear Stearns moment? Which we said, no. That was the most listened to and most downloaded podcasts we've ever had. So thank you to all the listeners out there. We appreciate that. Give us a, like, give us a follow. If you want to keep helping this podcast grow. I think it's almost as simple as when you have a 5% correction and some volatility. We know people are looking for more information, so hey, you know, nobody really wants another bear market, but it can help you grow some of the things we're doing. So if there's volatility that happens, we really appreciate that people  come to us. So, so that's a little bit about jobs, Jeff. I think the thing that's, again, the key concept, the market shook it off, which is, which is nice. We're seeing global yields continue to go higher, which is the bond market's way of saying, hey things, aren't perfect, but likely stronger growth is coming.

Ryan (26:58):

The, the thing I want to build on though, and we're showing this chart or slide, I should say, well, no, not there. It is. Slide on the YouTube channel. Just the idea that it takes a while for jobs to come back. We're still like 5 million jobs away from where we were pre-pandemic. Or you look back on all the previous of cycles after a recession, how long it took for jobs to come back. I mean, Jeff, it was 2, 3, 4, 5, 6 years, right? It took six years at the last recession for jobs to come back. We lost a lot more jobs this time. Now it bounced back more. But I think just as important for people to remember, this is frustrating, right? The jobs aren't coming back, remember retail sales came back in five months. A lot of the consumer things came back very soon.

Ryan (27:36):

GDP officially now is above where it was pre-COVID. About the only thing that's not back to where it was, not the only thing, one of the big things, is clearly jobs, but I guess the concept is that is normal for jobs that aggravate us. Jeff, the last thing we're going to talk about, and I, I did talk about this earlier, but I want to have a little more of a conversation. That'd the Federal Reserve Bank of Atlanta GDPNow is looking for about 1% growth. Tell me about some things that you're seeing that suggests okay, 1% now, maybe, right, but that aren't so worrisome. What are you seeing out there?

Jeff (28:09):

Well, I'm first, you know, consumer spending is the biggest piece of GDP, right? And consumers have a ton of savings, excess savings, right? I mean there's trillions of dollars sitting in, you know, bank accounts and money markets. So that's, that's one piece. And plus, as I mentioned, COVID cases are coming down and you know, some of the you know, some of the regions that had been slower to come back can start to come back more. Certainly that would suggest we'll get a little bit, bit of a push. And then last we had you know, a big inventory draw down. So we’ve got to restock inventories. And that will lead to a little bit of a rebound in economic activity over the rest of the year and into next year, frankly. So, you know, whether we get a 1% or not, I mean, economists' consensus is higher than 1%. That 1% is probably a little low. But that soft patch we think will be short-lived and you know, again, better, better days ahead.

Ryan (29:13):

Yeah. I mean, one we've talked a lot about is what's copper up to versus gold. All right. Copper struggled a little bit. All of a sudden, the time we're recording this, copper is up like three or 4%. Those industrial metals are all taking leadership again, relative to precious metals. That's usually risk on. The Aussie dollar versus the Japanese yen. The Aussie dollar has been strong versus the yen recently, usually risk on. High beta versus low beta, we’re seeing that leadership. Small caps doing a little bit better than large cap, seen that leadership, oh, what else is there? You know, consumer discretionary versus consumer staples, seeing that leadership. So we get the headlines, right? But again, this is called Market Signals. We're seeing some signals from the stock market specifically, not just the stock market, commodities market, stock market, that are suggesting, hey, there could be some better growth coming in the fourth quarter and into next year, so let's not ignore that. But again, 1% expected GDP. That number came out after the very weak jobs number. But still, maybe it comes in a little bit better, but that's still a lot weaker than a six or 7% that was expected this time, about two months ago. So Jeff, I know the big thing this week is inflation with CPI. So maybe talk to me a little bit about that and anything else this week that you're watching besides earnings, I guess. We already said that's a big one this week.

Jeff (30:28):

Sure. Well, by the way, we also have a lot of stimulus still coming through and likely more to come. So that provides some stability you know. This week it’s an inflation week with CPI being the main focus and, you know, that's another reason by the way, to be a little concerned about earnings because producer price inflation is stronger than consumer price inflation and that squeezes margins, right? Because wholesalers are not selling stuff for as much as they're paying. So that's something to watch. The consensus for core consumer inflation is about 4%. That's not too scary in this environment to me. And that could be the peak. You know, I'll go so far as to say the inflation we're seeing right now could be the worst of this cycle. We'll have to see. That could be maybe that's a little bold, but this may be about as bad as it gets. Hopefully it is. And some of those supply chain issues can be worked out and hopefully energy prices cooperate, but that's where we're, we're likely to be in that 4% range. The other economic data point this week to watch is retail sales. I believe it comes out Friday, that'll be up most likely. And again, reflecting all of the consumer savings. Consumers are still in excellent, excellent shape. And certainly again, as COVID wanes, we should see pretty good consumer spending numbers.

Ryan (31:53):

I'll just wrap it up like this. So we get the question a lot, 28, 29, $30 trillion in the U.S. that's a lot of debt, no doubt about it. Right. But you look at consumers, trillions of dollars in savings and bank accounts in really good shape. FICO scores, they are some of the highest levels they've been in a long, long time. You own a house? You probably have more equity because your house is up 20, 25% or so. So the consumer is in good shape and honestly, corporate America, we'll see about this earnings season, like we've talked about, but corporate America is in really good shape too. So it's kind of two sides this whole, oh my goodness, look, all this debt is going to end the world scenario. We don't think that, we've been saying that for a long time now, it's because consumers and businesses are in pretty good shape

Ryan (32:33):

all things considered. And the U.S. debt is a whole other conversation, which we could spend 30 minutes on. We're not going to do that today, but Jeff, thank you as always for the comments. My final words are, I'm not here next week. I'll be actually by Monday, by the time we record this, I guess I will be back, but I'll be out the whole time leading up to it. So I will not know what's going on in the world. Maybe next time you guys see me, I'll have a tan. I doubt it, I don't tan at all. I just burn, but you never know. So I I'll guarantee this. I'm probably going to gain a few pounds. This resort we're going to, The Sanctuary down in the Dominican Republic, food looks really, really good. I don't plan on doing too much other than sitting around eating and drinking for most of the time. So that should be, I guarantee that one. Compliance, I'm going to guarantee I gain weight. There, I said it and, and hopefully I don't get in trouble for that because it's, it's a guarantee I wouldn't bet against. Everybody thanks again for being here. Jeff. Thanks. Good luck with the show next week. I don't care what you do, just don't mess it up. Everybody. We'll see you soon. Take care. Bye-Bye.