TME Daily: In what macro backdrop will stocks work?

Will seasonality work next month?

66% of the time November has positive returns averaging 1.44% since 1945.

Source: Morningstar

The Enormous Eight

2023 total returns:

NVDA: +182%

META: +152%

TSLA: +60%

AMZN: +58%

MSFT: +42%

GOOGL: +41%

NFLX: +39%

AAPL: +32%

S&P 500 Equal Weight ETF: -3%

(Bilello)

Tech earnings outperformance

The tech sector has outperformed on an EPS basis post-GFC.

Source: Datastream

Margins

Margins are expected to improve for the second straight quarter in 3Q.

Source: BofA Quant

Bullish! Never bet against America

Or at least the Magnificent 7...S&P 500 Q3 GAAP earnings per share are 18% higher than a year ago, the 3rd straight quarter of positive YoY growth. Quarterly earnings are now just 2% below the record high from Q4 2021.

Source: Bilello

In what macro backdrop will stocks work?

"For stocks the issue has been the persistent rise in long date yield putting pressure on leverage, small caps and bond proxies simultaneously. We’ve been trading good is bad since the US 10yr broke above 4% and I think without a pothole that is still the primary headwinds for equities. Ideally we need to find some sort of soft landing that brings growth down to a 1-2% range while having a convincing disinflationary narrative (ie we want bonds up/equity up) but so far the data has remained too strong...it needs to slow without slowing too much to growth fears" (Rich Privorotsky, GS)

Higher hurdle rates could pressure buybacks

S&P 500 earnings yield (EY) less IG bond yield vs. TTM buyback yield with a 12-mo lag (1996-9/23).

Source: BofA Quant

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