Rally Time?

Ryan (00:00):

All right, Jeff, I am back. I wouldn't say I'm totally refreshed because get back on the bike and start rolling. But I'm, I'm back from my 15 year anniversary and beautiful sanctuary in the Dominican Republic. On the YouTube channel I am sharing. So we were there four nights. We had a really nice room the first two. We got upgraded to like, I don't know what you'd call this thing, had to have been like a presidential suite? It was enormous. You easily could have slept like 10 people in this thing for our last two nights. I mean, Jeff, you see it on the, on the YouTube channel there. I don't know, have you ever had a room like this because I've never had a room like this one.

Jeff (00:41):

Oh, man. Honeymoon in Hawaii would have been the closest, but it wasn't that nice. That's just a spectacular view. Glad you guys got to do that.

Ryan (00:52):

It was, it was something, it was something. So I don't know how we're going to top it when we do 20, but we'll  just get there. We'll see when we get there, I guess is what I'll say. So how things go last week? I wasn't around, I mean, you, we made it, I guess, right.

Jeff (01:07):

I think Barry and I kept it on the rails. It was certainly didn't meet your high standard, but I'd say we came pretty close and you know, fully all of our listeners enjoyed the discussion.

Ryan (01:20):

Well, that's, that's great. Thanks for filling in there. And obviously we're just going to get right into the show cause there's a lot to discuss as always. We're going to talk a little bit about inflation and hyper, potential hyperinflation. As some of those headlines have been out there with Jack Dorsey at Twitter, making some waves there, we're going to focus on the potential for a year-end rally. This market, literally, as we speak the S&P is making new highs, but we're going to take a look at, can it continue and can stocks outperform bonds and finish it up with a little bit of earnings season. Earnings season is in full swing doing really well. And actually also we're going to do a little Washington update, where Washington stands. So those are kind of some of the things we're going to focus on this week.

Ryan (01:59):

So Jeff first thing's first. Jack Dorsey on Twitter, I guess it was on Friday night. Let me make sure I read it correctly. I’ve got his tweet live that he said, he said, “hyperinflation is going to change everything, it's happening”. So this is a guy who is obviously extremely in tune with what's going on all around Silicon valley and just this, the world in general with Twitter and all the different companies he's involved with. I mean, you know, I know our base cases, we don't see hyperinflation, but what, what's your initial take when a guy who's very influential like this  sends out a random tweet on a Friday night? Talks  some pretty big, some pretty big words.

Jeff (02:36):

Yeah. Well maybe you have to start with just defining what that is. I mean, you know, if we go from four or 5% inflation to eight, nine, is that hyperinflation? And when I hear the term hyperinflation, I think a hundred percent, right. Prices going up year over year double or more than that. That's just frankly ridiculous. My guess is Dorsey doesn't really expect that. You know, part of me thinks maybe, you know, because he's a crypto guy, maybe he's trying to get that riled up, but even putting that aside, what he thinks doesn't really matter to how we invest, right. Based on how we invest, I think a little bit more inflation's coming this, you know, stubbornly high inflation is probably going to last through maybe the first half of next year, maybe a little longer, but then we think it's going to cool off quite a bit and we'll get closer to something that's looking more normal.

Ryan (03:30):

Well said. I mean, clearly he is a crypto guy. I don't know if his tweet did it or not, but it obviously moves a lot of those crypto's over the weekend and into Monday. You know, you look at like things like five-year inflation expectation, ten-year inflation expectations. Those have broken out in the last week or so above previous peaks earlier this spring. So, you know, the market is saying, hey, there could be a little bit more inflation. Now, one thing that caught me,  I think it's funny. It's truly funny. But Fed Chairperson Powell was talking to the South African Reserve Bank and he remained in the transitory camp, which is what he's been saying literally all year. But he also said, this is quote unquote, this is this quote, “elevated inflation to last longer than expected”. How in the world can you have inflation lasting long lasting, longer than expected and still call it transitory, Jeff? I'm a little stumped on that. It feels like he's talking out of both sides of his mouth, but it's almost like the guy has been saying transitory the whole time is now saying, well, maybe it could be around a little bit longer. I mean, this is just one quick quote from a long interview, I'm fully aware, but sometimes there could be something there. What's your take on what Powell had to say there.

Jeff (04:36):

We're just going to define terms this entire podcast, right? What does hyperinflation really mean? What does transitory really mean? I don't know. I don't know. I mean maybe six to 12 months is the range. That's an investment time horizon, right? Many of us who are tactical investors think a year ahead. And so a year ahead, we probably won't be too worried about inflation. That's my view. That's the view I think of LPL Research, but in the short to intermediate term, sure it’s a concern, we all know just by going to  the grocery store, the gas station and all of that, and certainly bidding up wages to try to get you know, what is it? Surprisingly scarce labor force.

Ryan (05:19):

Yeah, no, absolutely. I mean, you know, again, well, let's say, you know, what have we been talking about on this podcast for a while? Well, one of the better ways historically to kind of beat inflation is to be invested in stocks. S&P is up like 20% for the year. You have more inflation, bonds don't do that well. Okay. Your average bond fund is actually like down so far this year. I've said if you drop it into hit your foot and it hurts that tends to do better in a world of inflation. We've liked the financials. We've liked the cyclical value names, industrials. All of those groups potentially can do a little bit better in a more inflationary, a little bit gently, more inflationary world than the deflationary world we saw for 10 years before the pandemic. Honestly, let's be honest. You know, tech and growth did really well, so we're not in the inflation, major inflationary camp, but of inflation's a little hot and you know, those are some of the groups that can continue to do well. I mean, Jeff, any final comments kind of on inflation? I know we talk about, it feels like every week, but also it's in the headlines every week and we keep getting these questions asked every week. So I want to make sure we, we cover inflation. You know, let's put a bow on it. Well, how do you want to end it with this?

Jeff (06:22):

Yeah, well maybe briefly with how to invest. So natural resources tend to do well in inflationary environments. So we'd be leaning a little bit in that direction. You just talk about it, you drop it on your foot and it hurts.  Energy and material stocks look well positioned, but what some people are thinking about too much is real estate, right? We had a good discussion about real estate in our tactical investment committee meeting yesterday. That sector tends to hold up well over time and inflationary environment. So maybe sprinkling some investments in those areas makes some sense as a little bit of an inflation hedge just in case this is well, let's say transitory as longer than we anticipate.

Ryan (07:03):

Which I think we all learned the word transitory. Maybe we thought it was three months, six months, I guess transitory is a little bit longer, but let's move forward and talk about our friends now in Washington, Jeff, I, I looked about two hours ago, honestly, by the time we do this podcast who knows things could be a little bit different, but the general feel is, you know, that three and a half trillion dollar social package is likely going to be maybe cut in half about 1.7, maybe 2 trillion, seems like we're inching closer. It feels like maybe this week we could get a deal. I mean, what's your take with the latest in Washington? And who knows,  maybe something's happened from the time I looked two hours ago, honestly, maybe you saw it. What’s the latest?

Jeff (07:42):

Yeah, I haven't seen anything this morning. Right. But the last couple of days have been very, very interesting. Right. We  came into October thinking we're going to get corporate tax rate increases and that's going to clip S&P 500 profits. Right? Well, we'll get maybe some of that if the Democrats get a deal, which is still likely but we're going to get less than we thought. They might not even take the rate up at all, or they might just take it up a couple points which is certainly less than we expected not long ago. So that's, that's really important point. That's good for stocks, that lifts corporate profits relative to expectations. You know, but whether we get two trillion or 1.7, maybe even a little less than 1.7, that doesn't really matter. The spend is going to be spread out over a long period of time.

Jeff (08:29):

I think for us as investors, we should be focusing on those corporate tax rates and, and the other piece of this, which is certainly as important, capital gains rates, income tax rates, right? Those may not go up at all, dividend tax rates. That's a surprise. I think to, to me in all of us at LPL Research if you go back a few months it looked like those were very likely to happen. So we don't know what this final bill is going to look like, but certainly we're getting some upside surprises on the tax front.

Ryan (08:59):

Great points. I mean, you know, a year ago, obviously before the election, we said, okay, if President Trump wins, this could happen, if President Biden wins, this could happen. I mean, it was widely assumed, higher taxes, higher cap gains taxes, higher corporate taxes, you know, the finance law,  if President Biden won. And there's, there's still potentially some higher taxes coming, but like you said, there were some pleasant surprises. Now Jeff, the one that gets me, there's potentially a billionaire tax and Janet Yellen was over the weekend talking about this. I know it's been out there. According to the data I saw, there's less than 1000 billionaires out there. I think about 700 or so. And the question that I have Jeff to you, is the idea that apparently we're going to tax unrealized gains, all right on investments, right? Usually you got to sell something before the government comes and takes its money. Now this is just out there. I think I'm torn on what in the world. I guess if I was that rich, maybe I wouldn't care as much or maybe actually I probably would care even more. Take my money before I sell it. What's your take? Do you think this is the answer just to tax the 700 richest people in the United States and make up for a lot of the all the issues that we have potentially

Jeff (10:11):

Well taxing, the ultra-wealthy is probably a political winner for Democrats, so that makes sense. But this, this way of doing it is not workable in my view because, you know, if, if you get a, you know, huge appreciation in something and pay taxes off of it, and then it collapses, you know, do you get a tax refund? I just don't know how that would work, but because you haven’t actually put any of your wealth in the bank so to speak. So I don't like the idea of taxing on realized gain, because it's much easier to just tax rates on income or dividends and then set some sort of a break point, you know, incomes over a million, incomes over 10 million, something like that would make much more sense to me.

Ryan (10:58):

Yeah, I know that seems a little cleaner, but it's in the news and it's something we're definitely going to talk about. It also, so we've talked about the social potential spending package. What about the traditional of a, say about a trillion dollar infrastructure plan? It seems like we might get both of them about the same time. If we can get the social one knocked out. The other one seems like both sides agree. Is that kind of how you see it playing out potentially here, Jeff? Really both of them, boom, boom,

Jeff (11:23):

We could actually get a vote on the heart infrastructure package by the end of the week. Okay. That would be the 1.2 trillion only about half of that is really new spending. But 1.2 trillion in hard infrastructure. That's the deal right between the progressives and the moderates. You’ve got to tie them together. So once they get a framework for the social spending package, the, the vote on the hard infrastructure package will happen very quickly. Then, you know, you do the math, we're looking at maybe 2.9 trillion combined which is not far off from where we thought we would be. When all this horse trading began.

Ryan (12:03):

Yeah. And I'm not sure if that feedback was you or I, or even anyone picked it up, but it's like we better move forward. Cause almost like the government's listening. Cause I'm hearing some feedback, something itchy going on, maybe big brother's paying attention to what we're talking about, Jeff. Let's move forward. On the YouTube channel you guys almost need to see this to believe it, or maybe follow my Twitter feed, what I've sent out on Saturday night., My wife we had a Halloween party at some neighbor's houses and she came up with this idea to buy like stuffed animals and literally like cut them open and take the stuffing out and put it on her head and wear face paint, and then wear a body suit also. It sounds as crazy as it sounds. So I just described it I guess, but I did have a bear costume on and honestly, I didn't even think of this, but people on Twitter were saying is Ryan bearish now? Obviously it’s a joke, you know. But I'm not bearish now, but we've been structurally bullish for quite some time. But yes, I did wear a bear costume on Saturday night at my neighbor's house. I mean, Jeff, you're looking at the image there. Well, what's your take? Burt White said it was one of the scariest things he's seen in a long time. What do you think?

Jeff (13:06):

Oh, I, I like it. I mean, impressive that you went through that amount of effort to come up with your costumes, you know, I, you know, figure it out Halloween night to what I'm going to wear to go out with the kids. And I, you know, end up doing the same thing every year. My kids yell at me for not being creative. So this is, this is just outstanding. And the fact that you threw that together after you came back from your trip is really impressive dedication to the costuming craft.

Ryan (13:34):

Well, you might be surprised to hear this. I put virtually no thought into it. Emily bought it all and did it all, and I just threw it on. So it was, I have to give her all the credit, but yeah, it was a, it was a hit, we won actually cutest couple award at the Halloween party that we went to. So there you go. But I am not bearish, which is a fun, potential lead into a little bit of an equity discussion here, Jeff.

Jeff (13:55):

Before you go any further, Ryan, I got to say that I might try to one up your next week because we are inviting all of my dogs, doggy friends, over for a Halloween party. Dog's going to be in costumes, probably going to be about 10 of them. It's going to be spectacular and I will absolutely get pictures. So your picture was great, but I might just take that up a notch. We'll see if I can bring that to you on next week's podcast.

Ryan (14:24):

That sounds like a winner. I mean, literally as you and I are speaking my 135 pound Great Pyrenees, Walter, I'm looking at him right there. I don’t want to say his name because he's snoring away. He's kind of like in a way, the fourth person to this podcast, obviously Neil, our producer, is our third person who helps every single week, but Walter just snoring away right there. And I'll tell you, he's never once barked. He just, once he's in here and he's sleeping, he is out cold. I mean, clearly the discussion about Washington and stocks, he really doesn't at all. But I thought when you start talking about dogs, he might perk up, but no, he's out cold. That's  all right, though. So, so yeah, Jeff, I mean, it took a little bit of time, right? We had a 5.2% correction, September 2nd, peak in the S&P 500, which by the way, was the peak in the S&P 500 a year ago

Ryan (15:09):

also before an eventual 10% correction. Then eventual new highs. This time a 5.2% correction into early October. Sure enough, we rally back really strong October. If you remember on this podcast few weeks ago, we said, hey, October gets a bad rap. It's usually a pretty decent month, but it's really strong in years you don't have a midterm. We'll just call it odd years, odd years when you don't have a midterm or a presidential election, no jitters. Up like 6% or so, give or take on the S&P month to date as, as we speak here. But we finally made new highs. It's now the 10th month, this year that has new highs, the only year ever to go all 12 for 12, a new high every single month was 2014. You know, Jeff, I don't know, there's so many different ways to take it, but finally, new highs. What's your take, I mean, we had a 5% correction. Did you think we'd have a little bit more and I mean, I don't know, just pretty amazing the resiliency.

Jeff (16:03):

Well, I mean, given the risks right now maybe I'm a little surprised, but I mean, we’ve been inthis  “buy the dip” kind of environment for quite some time. I mean, you know, I'm a pretty simple investor, right? I just look at the fundamentals of the economy, corporate profits, interest rates, inflation, and, you know, inflation is troublesome, but really everything else looks, looks pretty good right now. Earnings season, we'll talk about in a bit, but off to a really good start and, you know, the supply chain disruptions and all the cost pressures and labor shortages, all that it's really, you know, not having a huge impact, at least not in the numbers. So companies are really doing a heck of a job managing through that. So the fundamentals look pretty good. And you know, we're going to, I think, stick with the, “buy the dip” mentality here for the foreseeable future, at least until we lose the momentum in this economy and in corporate profits, which could be quite some time.

Ryan (17:02):

Yeah. Well, on this very podcast, you mean back in the summer months when we were having the real strong rally, you and I discussed, hey, you know, of course we could have a pullback eventually. We said five to 8%. You know, we, we didn't think we'd have much more with all the fundamental strength in the monetary policy, fiscal policy. Sure enough, we had a 5% correction and the thing that gets me as an old-school option trader, I love to look at market sentiment. Remember we had almost a 5% correction, late January, early February on the Game Stop worry, Game Stop was soaring, which institutions on the other side of that, people got really fearful. Then  I'll call this the Evergrande  sell off, we've talked about Evergrande a lot late in September, right? The Chinese real estate company, that's in a lot of trouble.

Ryan (17:39):

That was  the Evergrande sell off in a way. You know, and we said again, how quickly, how bearish everyone got, right. Bank of America has a survey, Jeff, we talk about this one a lot in our team, that looks at institutional money managers. And they're the most bearish they've been in a year. They've raised the most cash they have in more than a year. This is on just a 5% correction. Now, some key concept though, yes. The S&P pull back 5%. But if you look at kind of like what the median stock did, right? The median stock in the S&P pull back, well, over 10% close to the 15%, we saw a lot of stocks in NASDAQ down at least 20%, a lot of small cap stocks down at least 20% The market held up a little bit better, but your average stock actually felt some more pain.

Ryan (18:18):

So I think that's one of the reasons we had some good amount of bearish sentiment on that recent correction, but Jeff, I'll let you talk now, seasonality. This is one of those, it is what it is. Beginning on October 28th, which guys is my birthday. So feel free and send me a birthday present if you want, that kicks off the seasonal strength that ends the year typically higher. Right? So the end of October through the holidays and into December, I mean, Jeff, we're up 20, what, 21% or so year to date on the S&P. Do you think we have that much juice left for the seasonals to play out once again.

Jeff (18:53):

Maybe a little bit. But I think we all agree that, you know, the strong October has pulled a little bit of these seasonal gains forward, right. But this, you know, good news on the tax front, hasn't really, you know, that, that wasn't factored in yet. So maybe we've got a couple of points from the seasonal boost at least left. Plus we maybe get a little bit more of a lift if we don't get these tax increases that people were worried about, remember, you know, whenever people hear capital gains tax increases, they run out and sell, right. We may not get that wave of selling. And even if we do get a capital gains tax rate increase, it may be effective the day has passed and it might be too late for people to sell. So you know, we're not even going to get that. So yeah, I think we've got, you know, maybe a few more points left in this market easily, you know, barring any unforeseen negative developments out of left field.

Ryan (19:46):

Yeah. I mean, I think that makes sense. I think the next slide. Yeah. The next slide just is simply November, right? I mean, seasonality again, it is what it is. We don't blindly invest on this, but we're not going to ignore it either. Since 1950, November's the best month. The last 10 years, November is the best month. The last 20 years, November's the second best month. Any post-election year, November is the second best month. So that's a lot of different ways to say, hey, you know, see seasonally, there's some tailwinds. Now this week in our Weekly Market Commentary Scott Brown, who's joined this call a couple of times, took a look at kind of the seasonality thing. But he also overlayed the fact that all of a sudden, we're starting to get some market participation. I mean,  something a lot of people don't understand.

Ryan (20:29):

Jeff, I think is the average stock it peaked like late summer. Okay. Or late spring, early summer, a lot of stocks have literally gone sideways for several months or the last six months. And now we're starting to see participation with other sectors, small caps, mid-caps, breaking out, weaving small caps, eventually break out. There's some underlying strength there that again, suggests with the seasonals, hey, be open to some potential strength, continued strength, the rest of this year into, into next year. I think Jeff that's maybe my last comment I have before we move to the last thing, earnings, anything you want to add on, potential year-end rally, or how to position for it, or bonds, stocks, whatever. However you want to put a bow on it. It's all you.

Jeff (21:10):

Yeah, well COVID cases have come down a lot and getting more reopening. Remember that the U.S. economy is probably hardly going to grow at all in the third quarter. We get that later this week, the first look at that number. We have better growth coming right as the reopening continues. So I think that's another reason to expect a year-end rally is the trajectory of, of economic growth certainly pointed higher.

Ryan (21:35):

Yeah, our friends at the Atlanta Fed, they do the Atlanta Fed GDP Now where they estimate using some, some proprietary indicators on what GDP could be. I think GDP in the third quarter could be slightly negative now. In June, which really wasn't that long ago, they were looking for 10% real GDP growth in the third quarter. Now it's negative. I mean, if you, if that's all you heard, you'd say to yourself, wow. Stock market's probably not doing so well yet, again, it is doing better. I mean, Jeff, what's the easiest way to describe that to someone? GDP was supposed to be up 10 now it's negative practically, but stocks has gone up. Why in the world? How is that possible to your average investor? It makes no sense.

Jeff (22:14):

Well, it’s Delta variant and all the related disruptions from that, but it's important to keep in mind is that it just pushes out the growth that growth is eventually going to happen. We're just spreading it out over several quarters. And, you know, as investors, , maybe worried about volatility, that's ideal, right? Because you continue to look forward to better days ahead for longer, rather than just seeing a surge in growth and then coming right back down and investors wondering, you know, when's the better growth going to come next. So all in all, it's a pretty positive environment with that. You know, the growth being pushed out and investors can still look forward to.

Ryan (22:51):

I think it's as simple again as it's all about the future. Right? Okay. So we've took some growth the third quarter, but like you said, we're spacing it out and that growth likely comes fourth quarter, first quarter next year. So Jeff, the final, a little fun thing I wanted to talk about, the bandwagon is open. As many people know I'm a long suffering Bengals fan, apparently all of a sudden the Bengals fans are everyone's favorite team. I saw Ja’Marr Chase set the all-time record for most yards receiving in his first seven games of over 750 yards, second in the NFL. Joe Burrow had at least two touchdowns, every single game this season. I think the only quarterback to do that in the NFL. We won't talk about your Chiefs, it's a rough one, but the season's not over, but the bandwagon is open, you coming over, you a Cincinnati fan now?

Jeff (23:32):

They're in a different division so I think I think I'll come on over and, you know, if the Chiefs figure things out, maybe I'll go back to them later, but right now  I'm going to focus on the Bengals and celebrate those successes with you.

Ryan (23:45):

 As I always say, a long suffering fan, it's sad, but we all just assume the worst is going to happen because in 2015, the Bengals are 9-1, had one of the best teams in football, Andy Dalton has a fumble, falls over, breaks his thumb, out for the year. You know, just something goofy like that. We just assume the worst is going to happen. Cause we've been cursed for so long. But I don't know. I mean, so far they, that defense in the top 10, offenses close to the top 10, playing better. So we'll see. But as a Bengal fan, it's exciting. And we have the Jets, I've got a ton of friends up in New York, Jets look like a disaster, so hopefully the Bengals are 6-2 going into their bye when it's all over. So anyway, Jeff final thing, and this is all you. Earnings season. Earnings season looks like it's been really, really strong. Again, maybe not quite as strong as some of those previous quarters where we just blew the estimates out of the water, but we're doing pretty good this time. Tell me how good it's been.

Jeff (24:37):

Yes, it's been, it's been really good. I mean, we can't expect the upside surprises we've got the last couple quarters, right? The environment's gotten tougher, expectations have risen. The year over year comparisons are tougher as well. So, you know, you got to kind of keep all those things in mind. With that perspective, this is still been quite a bit better than I would've anticipated. We thought maybe we could get 10 percentage points of upside. That was our best guess coming in, which would have put earnings growth in the high thirties year over year for the quarter. It looks like we got a really good shot to get into the forties. Now, based on the results we've seen, because we're already tracking to 38 based on Factset numbers and we're not even halfway done, not even 40% done. The big tech names still yet to report, they move the needle.

Jeff (25:28):

40% of S&P 500 profits are reporting this week. Okay. That's just a huge number. That's Microsoft, that's Alphabet/Google that's Apple that's, you know, Facebook just reported, just huge, the huge names, right? Amazon. So after we get through this week, we'll have a better idea, but it looks like we're going to get another quarter of, really strong numbers relative to expectations. And then on top of that, despite all the challenges, right? I mean every conference call, you're hearing supply chain problems,  inflation, cost pressures, all of that, shortages, every call, thousands of mentions of those terms on the conference calls so far. And yet estimates for the next four quarters are rising. It's really impressive. So there's, you know, another reason why I again, I think stocks can still go higher in the near term here. So a lot of earnings momentum, and it doesn't look like it's ready to stop just yet.

Ryan (26:26):

You talk about what's priced in, I mean, we've talked about higher prices and supply chain issues. It feels like for six months now. So obviously we've been talking about it for a while. Mr. Market's aware, but Jeff, at the same time, when I asked you this, I did see that P&G, Kimberly-Clark and ConAgra, at least for three of the big names that actually said, hey, you know, COVID concerns, supply chain issues. We're going to up some prices a little bit, right? I mean, that's that inflation thing we're talking about. Have you been hearing more companies talk about potentially increasing prices on the consumer? Those are the three big ones that happened that I saw, but any other ones out there. Are you seeing more in the future? Maybe that it's going to say, hey, sorry guys, you've got to pay more now.

Jeff (27:03):

Yeah, I haven't, I haven't seen too many others, but I mean, there's a good reason for that because basically we've seen banks, you know, the banks are the early reporters and they don't have those same challenges. Right. And actually the costs have been pretty good. Even, you know, Facebook last night the markets seem to like their capital spending guidance. They're going to spend a little less than analysts anticipated. And so we're not really hearing a lot from the banks and the tech companies so far about higher costs. But when we get more of those, you know, consumer product companies, we get more industrial companies that are actually making stuff and shipping it. I think we're going to see more price increases. We're, we're running at about 5% CPI right now, little less with core. Hopefully that doesn't go too much higher, but you would anticipate companies to take price increases. That's why earnings and stocks tend to go up and do well when you see inflation pressures, because they are able to take those price increases. And equity is a pretty good inflation hedge.

Ryan (28:10):

Well, that was an excellent point. And then the question of course, is well, if things are costing more, how much is that going to impact the consumer? Believe me, we're going to watch that every single week. But as we've said before, the consumer has more than $2 trillion sitting in money markets and savings accounts. And there's a lot of cash out there. A lot of balance sheets at corporations and consumers are in really good shape. So I think it's all part of we're aware higher prices are likely coming a little bit still here, although we don't see hyperinflation, like we started the discussion, but again, the consumer's in fairly good shape and they likely can withstand that. And again, the stock market’s smarter than all of us and the stock market doesn't care about our feelings. And as, as we've been seeing these new highs are happening. So if we were truly on the, oh, the edge of a new recession, we'd be seeing more worry in in the bond markets more worry in the credit market probably more worry in the stock market. We're just not really seeing that. So, Jeff what else is this week should investors and our listeners of this podcast be on the lookout for?

Jeff (29:06):

Yeah, well, besides the massive earnings calendar, you've got GDP consensus expectations are about three and a half percent, but as you mentioned, the Atlanta Fed trackers suggesting lower. So we could get, you know, something closer to maybe one to 2%. The key question is what's coming in Q4 and Q1, right? The market's already kind of moved past the slow Q3. That's probably largely priced in, but it'll be interesting to see what happens there in terms of inventories. If we still have a big inventory build ahead of us, which can support the you know, GDP estimates going forward. And then beyond that, we'll just continue to watch Washington of course because you know, by the end of the week, we could have a good idea of what those two packages are going to look like.

Ryan (29:55):

Absolutely good points. And honestly, I forgot I put this slide in here, but I think it's interesting. So crude oil, again, it goes higher. You pay more at the pump, right? And potentially you're going to pay more for a lot of different things if crude oil is going higher. Commodities in general, likely look like they're in a, in a higher regime environment as well, along with stocks, they can go higher together. But Jeff, I saw two headlines recently just from a contrarian point of view said to me, wow, maybe crude oil is going to continue to go higher here and be strong. University of Calgary, hit pause on bachelor program inoil and gas engineering. Only 10 people were in that program. Also, Exxon debate's abandoning some of its biggest oil and gas projects. So when you see headlines like that with the commodity, literally breaking out to multi-decade highs, give or take, potentially can be from a contrarian point of view, continued strength. So, I mean, what's your take on the energy sector, Jeff? I mean, our take at LPL Research, we like cyclical value. Energies had a heck of a run there is no doubt about it, best, best performer this year and best performer over the past 12 months by like a mile. You think it can keep going or what would you put in a portfolio right now? Would you overweight energy here?

Jeff (31:02):

Oh,  I think  I'm getting a little bit of air sickness, put it that way.

Ryan (31:09):

Smelling too much oil when you smell too much gasoline, it smells good for a minute or two, and then you get a little sick, right?

Jeff (31:14):

Yeah. I mean, we're, we're up at you know, pretty tall heights relative to where we've been. So, you know, my take is that it probably has a little more to run cause you know, this is, these are some powerful trends. Opening in the economy, you know, relaxation of travel restrictions, right? More flying, more commuting and all of that. That's a good oil demand story and OPEC and Russia are not ramping up production any faster than they told us they would a month or two ago. So that's good. So there's the formula for more gains, but after such a huge run. Sure,  I would say, just keep it on a short leash. Don't get too overweight in the energy sector. It's when it drops, it drops quickly. Yeah.

Ryan (31:59):

Good point. You mentioned opening up an air travel. Mark Zabicki, who's been on this podcast many times, our director of research, I know is flying up, I think it's what today, right,  to go up to Boston, to hang out with you and Barry and some other members of the team .  You've never met Mark face to face, right? I'm pretty sure. Right. This is the first time?

Jeff (32:18):

Wrong actually.

Ryan (32:21):

First time I've ever been wrong on this podcast, by the way.

Jeff (32:24):

There is  a first time for everything. Mark started talking to LPL several years ago. So I actually had the privilege of interviewing him for a position on this team before, you know, several years before he was actually hired to run our group last fall.

Ryan (32:43):

Well, I'm putting an asterisk by that then, that's a roundabout way of saying you did see him face-to-face but not since he's been our boss, put it that way. It's true. There you go. Yeah. So, Jeff, I hope you guys have fun with them and safe travels to Mark getting up there, but yeah. Thank you to everyone who continues to listen to this podcast. I don't know if we're officially there, but we're really, really close 500,000 downloads since we started this podcast just over three years ago, thanks to Neil, our producers, always for helping us. And thanks to everyone out there keeps listening to this podcast you know, give us a like, give us a follow. It does help us build our brand and build this brand and get this out there to more people. So with all of that, Jeff have fun up in Boston with Mark. Hopefully you guys get to eat some good food. I know you will, and everyone else we'll be back next week. And we're going to take a look at  Jeff's dogs dressed up for Halloween. It should be a very, very special LPL Market Signals podcast. See everybody in a week. Take care. Bye-Bye.