Time to Dip Your Toe In Europe?

Ryan (00:00):

Jeff we're back in the latest edition of the LPL Market Signals podcast. We know what the crowd wants. People want to see your dogs and your dog’s friends dressed up for Halloween, but like any good, I guess, presenter or showman, we're not going to show that quite yet. We're going to make everybody a stick around for a while. I guess if you're watching on YouTube or even listen on a podcast, you can obviously change the speed and make us talk a little faster to get where you want to go first off. But guys, we're going to get there soon enough. You know, Jeff, first things first, remember that book about 20 years ago, approximately, “Dow 36,000”. Well, we hit it last week, just two years late. What was your take on that book? Remember that one?

Jeff (00:47):

Yeah. Wow. At the time I remember thinking that was a pretty gutsy call, but know if you do the math and you just compound over time, you know, it, wasn't so ridiculous that, you know, we'd get there in a couple of decades and we sure did.

Ryan (00:59):

We did. And you know, that's why, I mean, again, this is not a call, right, but like Dow 100,000, it sounds crazy, but hey, we're all listening to this and we're around for 20 or 30 years, you compound that at seven, 8% a year. It's really not quite as crazy as it sounds. Was interesting though, obviously this book came out in 1999. Most of us remember the stock market peaked out soon after, I guess it was, let’s see NASDAQ peaked out in March of 2000. I believe the S&P peaked out like in August of 2000, but still near a major, major milestone peak. And when I looked into it a little bit more, they were saying at the time the Dow was like, you know, over 10,000, approximately, I honestly don't know the exact number, but 36,000 was pretty far away. They were saying they should have been valued there right now. Like they weren't saying we'll get there in two decades, say case some arguments that you're talking about euphoria and things like that. That was a time. Well, I mean, Jeff, you know, I didn't even know we'd go this route. What's your craziest memory of like 19999, 2000, you know, from an investing point of view, at least.

Jeff (02:00):

Wow. Well, I was just getting started in business and I remember sitting right next to the cage and you know, I could write my own tickets, do my own trades. So we would try to guess which “.com” stock would be featured on CNBC at lunch, you know, buy the stock at 11 and then see if we were right. If we were right, we got a pop, we'd sell it at one. So that was a, you know, it was, if you got it right, it was a profitable trade back then because stocks were just moving on any publicity, anything that had “.com” in the name  that was certainly  a very crazy time.

Ryan (02:39):

It was you think about it, all those message boards, 20 minute delayed quotes, people are trading on 20 minute delayed quotes. How crazy is that sound? I was, I guess, Xavier University in Cincinnati got the bug. My dad gave me some play money open up. I think it was  E-Trade account and quickly like doubled it. Because I was doing the same thing just watching on CNBC, they talked about Sycamore Networks or Juniper Networks or Lucent. I just buy it. Then it'd go up a couple of hundred bucks and then sell it. It was easy. Right. And then of course I was on margin. Had no idea what I was doing. Just saw money going up every day, then everything crashed and burned, you know, 90, 95%. A lot of those companies don't even exist anymore. And I was on, on margin. So I lost it all, but I was hooked.

Ryan (03:19):

I realized, oh my goodness, I could have made money on the way down. I had no idea, but I, I, that's what I wanted. I knew it was what I wanted to do and where we are where we are today. So Jeff, let's just get into it. You know, really unique situation. We hit 36,000 on the Dow. We're going to talk more about kind of some of the really just crazy things. I mean, I'm using were crazy that are happening, the market continues to go up. See, it seems like every single day we're making new highs. We're going to talk about just kind of how, how unique that situation is also going to take a look at last week's Fed meeting. Remember we gave a preview of the Fed meeting, Fed didn't really rock the boat too much. I'll just kind of give you that, but we're going to talk about the Fed and then some of the recent economic data that we've been seeing.

Ryan (03:58):

And then one of the most popular questions that we've been receiving lately. What about Europe? France just broke out to an all-time high earlier this week literally went nowhere for like 20 years. A lot of other areas in, in, in developed international, and Europe specifically, start to look a little bit better. So we're going to talk about how we see those important areas  from a portfolio point of view here in a little bit. So Jeff, again, a month ago on this podcast, we mentioned the “Rich Dad Poor Dad” guy, and how he gave this very, very dour call about a market crash coming. You can go back and look it up. We talked about at the time he's given that call for a long time now. I guess a broken clock will be right, what twice a day or so. You know, but I jokingly called it “poorer dad, poor dad” on our podcast channel here because some of the melt up that we're seeing, I mean, Jeff, I've got a bunch of stats, but just, you know, kind of what's your take. I mean, we're seemingly making new highs every day. Just an incredible ripper of a rally the last three weeks more specifically. What do you think really caused this incredible move higher in equities the last three weeks?

Jeff (05:06):

Well, I don't think you can pin it down to one thing. I mean, you know, a lot of people might just say, you know, we got a good jobs number. We have a strong earnings right now. Those are part of it. But I, I think probably the maybe more understated piece of this is, is low yields. Look at the 10 year treasury yield. We just went right back down to 1.4 come off of that a little bit, but right back down to 1.4, after making a run at 1.7. Lower interest rates support higher valuations on, on stock. So, you know, I think you know, that's a piece of it too, so sure. We can point all the stuff that's in the news every day, the Fed, you know, jobs report and earnings and all of that. And that's part of it. But I think interest rates has kind of an under, under reported piece of this latest rally. Okay.

Ryan (05:53):

Great point. There is a, we're going to dive a little bit more into what I'm to say is a surprising move, lower in yields that we've seen recently, but here's just some context around things. I've got some numbers here. Now at the time of recording this on Tuesday morning, S&P is up eight days in a row, longest win streak since April of 2019, new all-time high, eight days in a row, longest since 1997. The S&P is higher 17 of the last 19 days. Pretty much about the time “Rich Dad Poor Dad” was saying, here comes a crash. Higher 17 out of 19 days. That's a best in a 19 day period since 1971. Should the S&P close higher today on Tuesday, that'll be 18 out of 20 days the S&P was green. That's happened only once in the history of the stock market,

Ryan (06:41):

way back in 1954. S&P is up five weeks in a row, four weeks in a row of at least a 1% gain. All-time highs. Let's see here, there's a wild one. So the S&P has made an all-time high the first six days of this month, November, six days in, new high, every single day. Only once in history has a month started with seven consecutive new all-time highs. And according to what I'm reading, yeah, I can't read my own writing here, but it's 1964, one of those years that were just truly record-breaking 1964, 1995, 2013, 2017. Those are all some of the best win streaks and best bull markets we've seen in a while. This year, sure enough, is playing out like that. And then lastly, Jeff, we're up 25% for the year in the S&P 500 as of last night.

Ryan (07:30):

You know, who knows if we're going to close up or down you know, 25% for the year, but we're up 25% for the year in November. The month of December, which is usually pretty good, actually even gets better. In 1995, we're up at least 25%. We’re up almost 1.7% in December 1997. We'd hit it again up 1.6%, 2013, 2019, 2.4%, 2.9%, bunch of numbers I just threw at you. The truth is when you're up a lot coming into the usually strong month of December, you'll see some continued strength. Jeff, I just talked for a long time. I don't even know what I just talked about. I just listed some amazing stats, want to build on what I just said or anything else before we move forward.

Jeff (08:11):

Oh, this market has a lot of momentum. But you know, certainly, you know, people just look at the chart of the S&P 500. they might think, wow, we've come a long way. This is, this can't be supported, right? We we've got to come back down, but you know, again, look what earnings have done. Our earnings have grown, you know, third quarter earnings season we're probably going to be up 40%. Expectations were in the high twenties coming in. That strong earnings growth, much better than expected earnings growth supports the stock. So we said it in the last couple of weeks, stocks have not gotten more expensive,  even if they've gone up, they've gone up you know, 20 something percent this year, but earnings have gone up 20%+  this year in terms of expectations for 2021 earnings, not growth, expectations, have risen 20%+ this year. So that's a really strong foundation for stocks to continue to move higher here.

Ryan (09:01):

Yeah. Coming into the year the average  economist or strategist was looking for about S&P 500 earnings of 165. It's likely going to come in well over 200, when all is said and done again, most people probably wouldn't realize after a 25% rally stocks are cheaper now than they were at the start of the year. How's that possible? Cause earnings expectations have gone higher. So Jeff, at this time, the next slide indeed, is the reason a lot of people are here. Probably everyone is here for this reason. It is the dog party that you just threw over, I believe, the weekend, with some of your dogs and your dog’s friends. Again, this one, you almost need to see it guys to believe it on the YouTube channel. I did add “Go Dog Go”, remember that book about the dog party? It's a dog party, big dogs, little dogs, bred dogs, blah, blah, blah, yellow dog, green dogs. I threw that in as well. It was some pictures of your dogs and their friends. Tell us about the party, Jeff. And first off, no one pooped on the floor. Did they? I mean, that's a sign of a good party usually.

Jeff (10:05):

No, it was all outside. I'll just leave it at that. In response to your question, it was so crazy. The dogs just running around everywhere. It was really hard to get pictures. So a couple of these are indoor pre-party pictures, right. But yeah, we've got a Phoebe and her Wonder Woman, she’s a Cava-poo. We got Daisy, she's a Maltese. I think she's a Maltese Shih Tzu mix. And then you've got Leo, the Golden in a lion costume. You've got another Leo and he's a Labradoodle with a Star Wars costume. And then my Bella here, you saw her last week in her. I guess it's like a salsa dancer, even though those arms look like horns that's, we'll call her a salsa dancer and then little Bailey there  in a pumpkin, she's some sort of Doodle, I think a small Goldendoodle. So we had a lot of, a lot of Doodles represented. There were like 10 dogs and man, it was wild watching them run around.

Ryan (11:05):

Oh, wow. That's I think at first for this podcast to really dive into a dog party, you know, we're going anywhere we want to go anymore. I mean, again, guys, by the way, we've hit like 500,000 downloads in just over three years we've done this podcast, hundreds of positive reviews and listens and everything. So I think maybe we've earned the right to go to the dogs once in a while and on our podcast. But thanks again to all the listeners. Give us a, like, give us a follow. It does go a long way. So Jeff, you know, one interesting, you're talking about what the dogs are, what you think they are. So there is a company actually that you can, we went to PetSmart. It was my daughter's birthday the other day, Susanna just turned 14. And one of the things she always wanted to know, is what is Thurman? Thurman's our 14 year old, kind of looks like a Spaniel.

Ryan (11:47):

We were told he is a different type of dog when we first got him, he's kind of a mutt honestly, she was, she always wanted know what he is. So there's a company that you take the swab and you, he loved this by the way, swab his mouth for like a minute. You put it into the thing, mail it to Boston, your neck of the woods and others, a lot of good biotechs up there. And they send it back to you within two weeks, the exact breakdown of what your dog's breed and what percent he is. Right. I'm assuming he's like 75% Spaniel, but what's the rest of it? Well, for a hundred dollars, we now get to know exactly what breed Thurman will be. And I'll let you guys know. Maybe in a couple of weeks, I hit the results. We'll, I'll put a picture of Thurman up. You ever heard of this, by the way, Jeff, this it's amazing the way people spend money, maybe this is some type of bear market signal though. I just wasted a hundred dollars to know what breed this dog is. But anyway, you ever heard of that one?

Jeff (12:34):

I've heard of something like that. Yes, but I mean, we, we didn't get arrested rescue. We went through a breeder cause we didn't know what we were doing so we know what Bella is, but I could see why you'd want to know.

Ryan (12:48):

Yeah. It just kind of a fun thing. She was, she got a lot of different presents and different things and you know, again, not a recommendation of the stock, but 14 year old girl does like Lululemon, everything. I bet she got a bunch of Lululemon and that stuff isn't cheap by the way. So anyway, it is what it is. That's why that stock is up so much, not a recommendation, but again, popular, popular stuff. So Jeff let's move forward here. We are going to do a little review of the Fed and I got a goofy little image here of a gymnast, sticking the landing with an image of Jerome Powell’s head. I'm saying the Fed stuck the landing. I mean, my goodness gracious. It feels like 10 years ago, the Fed did their interest rate decision. And now, hey, we're making new highs every day. So clearly the market took it in stride. You've had a few days to think about it, Jeff, anything at all, from what the Fed said that surprised you, or just kind of, to me seem like what they've been telegraphing for about two months, what'd you think?

Jeff (13:41):

Yeah. I'm not surprised about what the Fed told us, right? I mean, a tapering, most people thought that that would start now and then it would continue through, you know, roughly June. And then after that we'll have liftoff and the Federal start to raise rates. What surprised me a little bit is that the market actually has been a little bit more aggressive in pricing in the start of the rate hikes, right? We think it's going to be more like, you know, December, January a little over a year from now. Market saying, no, we might get rate hikes mid-summer next year. That seems too aggressive to us. So, and you know, the big reason why is because a lot of this inflation is supply side, right? And once these supply chain disruptions are resolved and the labor force kind of reaches its equilibrium, people start taking all these open jobs we'll see less pressure on inflation, right? The demand side, you know, strong, but in a year it might not be quite as strong. We think the pressures on inflation will alleviate and the Fed will be able to wait until late, next year to start rate hikes.

Ryan (14:52):

Yeah. So I'm just looking at some of the notes that I wrote when it happened, you know, they did ask Chairman Powell during the Q&A session. They said, what do you think about rate hikes next year? He pretty much said no comment. So he did a good job, I guess, skirting away from that. Overall, economy's improving, seeing some big improvements in the employment picture. We are going to pop up the jobs number here, literally the next conversation that we have, but the truth of the headline was it really, there were no major hawkish surprises, a little bit under the surface, but honestly it just really seemed like one of the more telegraphed Fed meetings we've seen in a while. Now, one could say, well, why would that not be sell the news if it's all priced in? Why is it not sell the news?

Ryan (15:30):

Well, I think it's simple as we're running bull market here, and the market wants to keep going higher because those earnings you just talked about, but yeah, nothing else really stands out. We like to talk about the Fed, you know, the other thing, maybe about the Fed Jeff. So the decision came and went, by the way, they're tapering. What is tapering for people who are listening don't know. The Fed is buying $120 billion worth of bonds every single month. They're going to start buying less. They're going to start buying less by 15 billion and then continue to taper down from there. How many bonds they're buying. And they're planning to stop that sometime. I think it's July or August of next year. Now believe me, that can absolutely change, but that's what's been very well telegraphed. I mean, so, so Jeff, let's go this route.

Ryan (16:09):

Jerome Powell’s term, I believe is what we call it, is up in February of next year. Seems like he's the favorite, you know, you got the, I don't know if TMZ is out there doing it, but people are out there taking pictures of who's coming to the White House, who's not going to the White House. Apparently he was there last week. People assume it was an interview. Brainard, it was released just the other day, maybe yesterday, was actually interviewed, apparently, for the job by President Biden, by the way, the President gets to pick who's in charge of the Fed. The sticking point to this potentially everything's political is Jerome Powell is a Republican. And Elizabeth Warren called him, I believe it was paraphrasing this one of the most dangerous men in the world or the extremely dangerous man. So clearly the far left doesn't like him. We know that. Well, what's your take, Jeff, do you think he's going to get re-elected though? Or what's your, what's your view here?

Jeff (16:56):

Yeah, I odds favor that you know, our chief Fed watcher Lawrence Gillam, our Fixed Income Strategist, favors that. Maybe he's a 3to1 favorite you know, the progressives want tougher bank regulation and they can get that through the regulatory oversight at the Fed. Maybe not necessarily the head, the president of the Fed. So Lael Brainard probably ends up being in a supervisory role, chief regulator of the banks. And then we get what maybe get Powell again. I mean, it's not a done deal, but it's, it's leaning that direction. I think based on the tea leaves.

Ryan (17:32):

I believe that's Quarles currently, right in charge of a lot of the banks and he just announced yesterday, he's stepping down, but I think everyone expected that. So again, not really a surprise, but again you know sometime fairly soon, I mean, most people don't expect this to be dragged out very long. We might have some announcement on who will be in charge of the Fed quite soon, but Jeff, again, what probably, the Fed’s important, we're not minimizing the tailwind of, you know, monetary policy. I mean, as we've pointed out for a long time now, that its tailwind and it's one reason we're in a bull market. You know, the other is jobs have gotten better, right? I mean, we just created 531,000 jobs, which was the highest number we've seen since July when we had like a million jobs created. Also big revisions to the previous months. I mean, Jeff, it's kind of one of those, it is what it is. Hey, jobs are coming back. That's gotta be a good thing, right?

Jeff (18:25):

Yeah, absolutely. But this, this isn't as good as it's going to get. I mean, you just said that we we've had million job months. We're going to get, we think maybe a couple more in the next two months. So you know, this is good progress. The kids go back to school and all of that, end to the supplemental unemployment benefits and, you know, COVID cases have come down, but you know, there's reason to believe that because of the timing lag of the report, right? Cause this is a mid-month survey. So when you get an October jobs report, it's really not October it's, it's the back half of September and the first half of October. Right? Not all of October. So we're going to get kind of a clean month after the improvement in COVID trends, right? And all those other positive factors impacting the labor market, add higher wages to the fact that people are getting more comfortable with COVID and people are more able to work and all that, or they have more incentive to work. Looks like we could do much better than this in the next couple of months, so it's encouraging that we beat the estimates, certainly this is a good number. The positive revisions were really good to see. But it's going to get a lot better.

Ryan (19:38):

Great, great points. So these are things we've talked about every single week that we do think, I mean the economy there's flaws  with everything, right? But the economy is clearly coming back. You mentioned COVID shots. So today is Tuesday. This afternoon, I'm driving down to Rock Hill. South Carolina. Rock Hill is famous for many things, but it's a small town, but they've got like three or four NFL players, guy by the name of Jadeveon Clowney is from Rock Hill. Anyway. So I'm going down there, but I’m going get my booster shot. And Sebastian, my middle kid, is going to get his first COVID shot. Cause he's in that five to 11 age group where you're not allowed well, as of, as of two weeks ago, not allowed to get a, to get your initial vaccine. So excited about that. Now, Jeff, I did get the Moderna one the first time, apparently I'm getting the Pfizer one now. I did my research. Apparently you're allowed to do it. And I look at it like I'm diversifying on my booster shot. Well, we'll see. I don't, I guess you get half as much as before, so which, which one did you get if you want, you want to point it out? Which one did you get in the beginning?

Jeff (20:30):

Yeah, I got the Pfizer shot. Okay. I don't, I don't really believe I had much of a choice. It was tough to get appointments since I did that. That was what was available. Not really an active choice, although it does seem like back then at least the Pfizer shot was more tolerated by people, you know, just in terms of how you felt after.

Ryan (20:49):

Yeah. I mean, I know the first one with the Moderna one I didn't feel that great. Second one though I was fine I thought.  But anyway, so anyway, so move, but that's all part of, you know, getting out there and getting, getting things out there and getting kids vaccinated. So moving forward, but Jeff, let's talk about something that kind of, I think really surprised a lot of people. Maybe, maybe not. We're going to explain why, but it did. The surprise move in yields and again, I've got the famous, very confused, wonderful actor, Marky Mark. I believe it's from actually I forget what movie it is now. Actually it doesn't matter. Every movie Marky Mark is in he makes a wonderful, confused face and I've got that up. Here's what we're going with. Jeff. The jobs number, what you just talked about on Friday came in really strong. Yields dropped straight down. The time we're doing this on Tuesday, the 10 year yield continues to drop. I think we're close to one 40 approximately. What in the world's up with yields because a lot of people are scratching their head all over financial media saying if things are so great, why our yields lower? What's your take with what's going on here?

Jeff (21:47):

Yeah. This is so hard to understand.

Ryan (21:52):

Look at Marky Mark’s face. That'll tell you that is a confused man right there. Right?

Jeff (21:56):

I mean, I, you know, you're asking an equity strategist about fixed income. I've been confused about yields many times in the last, let's say 13 years. But you know, with that caveat, I think international is where you look here. Right? A lot of folks thought that the Bank of England was going to hike and they didn't. So we got kind of a double story there. Once the market started to worry less about rate hikes outside the U.S. global yields came down. So that is certainly part of it. The other narrative, some people are citing is that once you start hiking rates, you slow growth long-term. Right? Right. And so now that, I mean, we could be in theory, right, nine months away from a rate hike in the U.S. you know, our view is we're 13 months at least away. But you know, that's in the time horizon that investors consider when they make investment choices. And so, you know, it's possible that the market's pricing in a little bit of a slower growth trajectory, let's say year two to 10 and taking that the 10 year yield down. No,

Ryan (23:08):

Exactly. This is one of those things. Talk to 10 people. You'll probably get 10 answers. Again, some of the headlines that I saw, again, the Fed, Bank of England, and then Australia as well, all were a little bit less hawkish with what they had to say, that potentially moved yields lower, but Art Cashin, who we are a huge fan of Art’s, read his daily note. He's forgotten more about the stock market than I will ever know. He pointed out that on Friday, the Pfizer news came out. Pfizer has the oral pill that you could take that apparently is just, I mean, what Gottlieb said, is Gottlieb said this is like a COVID ender almost right. This oral pill can really, really move things forward. And Art said, hey, it's all deflationary, right? All these worries about inflation. This is a potential deflationary act that just happened with the Pfizer news, which is a good thing.

Ryan (23:50):

And maybe not as much inflation's coming. And then that could be one of the reasons why yields have gone lower. But again, it's one of those things that are a little surprising, but it's taking place. We still see strength in those industrial metals, some other you know let's see your high beta versus low beta consumer discretionary versus consumer staples. We've seen small caps, breakout. These are all pro-cyclical things. So the bond markets may be saying a little bit different, but like you said, Jeff, I think sometimes the bond market just, oh, those bond guys, you know, sometimes they just like to get a little squirrely and maybe that's simply what we're seeing. So Jeff earnings, you kind of hinted at some of this, let's do an earning season wrap up, I think like what 460 or some odd companies have reported. We've given this update the last couple of weeks, but it's still really, really important. How good was third quarter earnings season?

Jeff (24:37):

Yeah, really good. I mean, even if you're, you're measuring earning season based on what, you know, what we used as a measuring stick before the pandemic, this is a good result, right? Beating expectations by about 11, 12 percentage points. So again, we were looking for high twenties based on consensus coming into earnings season, and now it looks like we're going to get 40% when all the numbers are in. So that's a great result, but even more impressive than that, remember estimates typically come down during earning season, right? Companies, you know, companies basically lower the bar, analysts take the numbers down, companies clear that bar, but then they lower the bar for the next quarter. That's kind of the routine. Typically, we're talking about a few percentage points reduction in estimates during earnings season. This quarter, which is a very, very tough quarter.

Jeff (25:28):

We all know about the supply chain problems, labor shortages you know, COVID challenges, right? All of that, cost push inflation you're, despite all those challenges, estimates actually rose during earnings season, up 1%, that is a really strong result. And frankly, a little bit better than I thought we would, we would do. So you know, really nice upside and then got to be encouraged by the resilience of estimates looking forward. And, and yeah, we thought we would, you, you said it earlier, right? We thought maybe we'd get like 170, 180 in earnings when the year began. That was a reasonable upside scenario. And, and now we're going to probably do north of 205.

Ryan (26:11):

Yeah. Well, who knows maybe, maybe a hail Mary chance of 210, right? We'll see what the final numbers are, but the truth is, again, earnings are justifying so much of this, but it isn't new. I mean, I've got the numbers here in the first quarter earnings are up 52% year over year at the start of earning season we expected to be up 24%. The second quarter, this was the big one, second quarter up over 90% year over year, at the start we expected to be up 63%. This third quarter, when we all started, we were talking maybe 27, 28%. And now, like you said, high 30s may be a chance to crack 40, so truly amazing. But again, justifying in our view why stocks can, feels like every day, but continue to flirt with new highs and you know, justifying why we've had such a huge, huge rally.

Ryan (26:56):

So Jeff, I will say it's fun, but it's also a relief. In the Dietrich household I have three kids, Gus, Sebastian and Susanna. Gus’s birthday is September 19th, actually talk like a pirate day, which is pretty cool for a kid. Sebastian's birthday is October 21st. And Susanna's birthday was this past Sunday. We call it birthday season. It is just like, you know, a body shot to  body shop, maybe not quite a Mike Tyson fight, but still a lot of body shots there. And the birthdays are fun, but I'm just going to say, I'm glad birthday season is over because it really is a lot. And you know, it's fun too, don't want to minimize it because people say, well, you're going to miss it someday. And that's probably true. But now that birthday season's over, three consecutive birthdays and a minute to breathe before the holiday season and Thanksgiving. I'm happy. How are the birthdays spaced out with your, with your two daughters?

Jeff (27:45):

Yeah,  we're right around where yours are. We've got a September and an October we just finished. Well, we're not totally done with birthday season cause my wife Debbie's birthday is November 20th. So maybe we'll bring out another cake for that.

Ryan (28:00):

November 20th. Yeah. So I've made the comment many times that October 28th, which is my birthday, was historically like the most bullish day of the year if you look at the averages. I said that until last year when it was down, like 3%, totally jinxed it, but it's still one of the strongest days. I am pretty darn sure I don't have in front of me, but I did this math, which day has had the most new highs in the history of the stock market. November 20th has had 12 all-time highs on the S&P no day, no day in the history of the stock market has had more new all-time highs than November 20th. Maybe this year, we'll be assuming the 20th is a, I have no idea what day of the week it is, assuming it's a weekday could be lucky number 13. So let her know. But she's got a great day because there's been more new highs ever than ever on her day. So maybe she should be the equity strategist. I don't, maybe you guys should switch it up. What do you think

Jeff (28:51):

Might be better for stocks? More bullish.

Ryan (28:54):

There you go. Well, speaking of stocks, Jeff, let's finish things up with, again, one of the more popular questions. I was just down with our friends at Allen & Company down in Charleston last week and this question came up. What do you think about Europe? I hear this question a lot Jeff. I know you do as well. Europe is looking better. We've been overweight United States relative to everyone else in the world. Jeff talked to me about Europe. I mean, it's looking better is kind of what we're saying. What do you see in here and why maybe someone should start to dip their toe in some developed international, specifically Europe.

Jeff (29:25):

It reminds me of another Ryan-ism. I think international stocks are maybe the only thing that when they go on sale, everybody runs out of the store. Yeah. Right. Stocks in Europe have historically been discounted by about 10%, 10 to 15% relative to the U.S. on a price to earnings ratio basis. And now it's like 27%. That is huge. It's the biggest discount I have in the data set I have that goes back to the late 80s. So European stocks are cheap. I actually, it's the same story for Japan, right? So people think, well, then we should go there. Well, valuations, aren't good short-Term timing tools. So maybe, you know, over the next 10 years, five to 10 years, you'll see better returns for international markets, but over the next six to 12 months, valuations, don't tell you anything really.

Jeff (30:19):

So we're not buyers of international on valuations. We also like technical analysis as part of our process. And if you know, it's just not working. Non U.S. stocks are not working. There you go. There's the chart. Part of this is the strong dollar, which clips international returns. Another part of it is, you know, when U.S. growth stocks are leading that makes it really hard for international to keep up because they don't have all the tech and the Fang or whatever we're calling Fang now that it's got metaverse in it. You know, all that stuff in it. Europe can't really compete in a growth led environment and we're still in a growth led environment, even now, even though the reopening is happening and we're seeing some bounces in some of the, you know, more COVID sensitive stocks. So it's still a very tough environment for international. Technicals do not look good.

Jeff (31:12):

Now, what looks good is what we saw in the prior chart. GDP growth in Europe and the U.K. could actually be better than the U.S. next year. So, you know, there's at least the makings of a story here. It's just, we want to wait for the market to show us some sign that conditions are investing conditions are improving over there. And global asset allocators are starting to move in because it's just been, you know, all U.S. all, all the time. So we still favor U.S., but we're watching this closely because you know, the economic growth expectations have been a little bit more resilient in, in Europe, even though they still have some COVID flare ups, Germany in particular you know, the economic picture there looks a little bit better on a relative basis right now than the U.S.

Ryan (31:57):

Yeah. You mentioned going to Europe and going to Japan. For my daughter's birthday we went to the Japanese steakhouse, which was excellent by the way, but anyway, enough about that. So potentially a little bit more earnings growth. What about, I'm sorry GDP growth. What about earnings next year? What's the earnings picture looking like for Europe specifically next year, Jeff, compared to the U.S. I guess really.

Jeff (32:20):

You know what, earnings don’t really stand out in Europe. They'll probably see a little bit more earnings growth this year than the U.S. but we're talking about, you know, 45 to 50% really strong in both. And then next year probably going to see U.S. do a little bit better, you know, we're mid to high single digit earnings growth is generally our expectation right now, although we haven't published an estimate, a formal estimate just yet, and the Outlook is coming soon. So, you know, earnings don't really stand out. Obviously the technicals don't really stand out and we're not going to use valuations right now as a reason to buy. So, you know, the story is really not compelling enough right now. We're neutral international and probably stay there, here for a bit until the market shows some signs of doing a little bit better relative to the U.S.

Ryan (33:08):

Yeah. So all, I will focus a little bit on that technical idea that you're talking about. If you just simply look at the United States versus the rest of the world, ex-US, it continues to go from the upper left on your screen to the lower, right. That means continued underperformance, we've seen that out of Europe. I mean, just earlier this week, though, we did see France finally breaking out above its early 2000s peaks. So it took about two decades to get there. Spain, Germany, lots of other countries in Europe have been relatively strong performers as well. It's just relative to the U.S. is still not quite doing as well. So it's kind of like catching a falling knife, right. It looks really cool when you can do it, brag about it when you do it. But again, it's really dangerous. You can get cut.

Ryan (33:50):

And a lot of people for many, many years have talked about developed international and they'd been cut, but Jeff, let's go a little bit different route here. When I first started the LPL five and a half years ago, for the most part, those five years or so, we've said we liked emerging markets more than developed international, specifically Europe and Japan. It's, it feels like we've kind of changed our tune a little bit there. Right? Tell me a little bit about emerging markets. If you had to rank U.S. one, that's fine. Who's your bridesmaid? Who's getting a silver medal.

Jeff (34:19):

Oh yeah. Developed international, getting the silver medal for sure. Mainly Europe and Japan. So you know, the debt crisis in China with the property developers, all ever grant situation that worries us in this regulatory crackdown over there still, still worries us. And then, you know, again, when you use technical analysis, EMs is not, not really working. So right now give the edge to developed international markets over emerging.

Ryan (34:48):

And I, I forget exactly when it was several months ago, Scott Brown joined the podcast. And we went through some of the favorite charts. He's our technician on the team. And one of the charts he shared was about China and how weak China was looking under the surface and how, you know, the rest of the world was pretty strong, early in the year. He's like, hey, something's going on here? Then as a technician you don't always really kind of wonder why, you just want to know that it's happening. And Scott has been more cautious we’ll say, I've not outright bearish China for a long time. And looking back, that was an incredible call because again, all the Chinese real estate issues and all the different things that happened in the headlines, but the cracks were showing before that all started several months ago. And again, China is a large part, clearly a big, big part of emerging markets and that's partially why emerging markets have struggled. And again, we like the U.S. more than anywhere else in the world, but developed international, put that number two and then emerging markets probably number three. So Jeff, the final question I have for you is what should investors be watching this week? Feels like earnings season is calming down the jobs number, the Fed. So it was like, we can catch our breath, but there still has got to be some headline risk out there. What should we pay attention to this week?

Jeff (35:54):

Yeah.  We might get good headline risks with the  build back better bill being negotiated in Washington, right? It looks like those tax increases to fund that might not be quite as onerous as we had thought. So we'll be watching the negotiations in Washington to finalize that bill. By the way, on that note, it looks like the international tax, that's a big piece of how this is going to raise revenue, is probably going to be pushed out to 2023. So, you know, maybe companies don't get hit quite, quite as hard as we thought. That's one. And the other thing to watch this week is the inflation numbers, we got an inline PPI number, that producer inflation number, this morning, but you know, it's 8%, so it's a really high number, but there's signs  of a peak. If you just look at what's happened over the last few months, we might be, again, that we've been saying this for a while. This might be as bad as it gets. And then you know, we get the core inflation number tomorrow, and we'll see , that'll be better because it has been running much lower than the producer inflation. But hopefully we get something a little bit lower than expectations.

Ryan (37:05):

Yeah.  GXO’s CFO, and they're one of the largest logistic companies in the world, he said they see thawing in supply chain. Lyft and Uber both said that driver supply is definitely starting to get a lot better. 200 factories in Vietnam had been shut down due to COVID. They make a lot of shoes for Nike, that's back online. A lot of the automakers had positive things to say about  the the supply chain issues that we're seeing. So not out of the woods, but again, some of what we've heard from corporate America during this earning season, clearly is being viewed positively for the future. So with all that, Jeff, we will be back next week for the latest LPL market signals podcast. We will take the Tuesday of Thanksgiving week off though. So I know everyone's going to be very sad, but you know, you just listen to this one again, twice, I guess, if you can just pay attention and visualize that wonderful dog party, if you so please, but Jeff, thanks again as always thanks to Neil, our producer, guys, thank you for listening to this podcast week after week.

Ryan (38:05):

And again, we'll be back next week to take a look at whatever's going on out there. Whatever's happening we'll talk about it. We'll see everybody then take care. Thank you. Bye.