Halfway through the third quarter, the reopening theme is catching on again

Halfway through the third quarter, the reopening theme is catching on again


Merchants on the ground of the New York Inventory Change, June 18, 2021.

Supply: NYSE

Inventory rotation: anti-lockdown, anti-low yields.  

We’re midway by way of the third quarter, with the S&P 500 up a good 3.8% within the final six weeks.

Even whereas numerous merchants are on the seashore, there are two massive narratives in place driving the motion: the trajectory of the delta variant and rates of interest.

The market has voted to imagine that the variant won’t derail the restoration (some merchants have gone additional and are insisting there are indicators the delta variant is “peaking”), and that rates of interest have bottomed and are transferring up.  

Because of this, reopening oriented sectors like Industrials and Supplies have been outperforming this quarter, aided by the infrastructure invoice:

Industrials/Supplies: massive momentum
(QTD)
Nucor  up 28%
Dover    up 15%
Martin Marietta   up 11%
Vulcan Supplies  up 11%
Textron               up 8%
Deere                 up 9%

Charges have been rising because the robust July jobs report, and so have banks, in addition to a smattering of different financials like Nasdaq:

Financials: massive momentum
(QTD)
Morgan Stanley   up 13%
Goldman Sachs    up 9%
Wells Fargo          up 11%
Nasdaq                 up 8%

Shopper shares are cut up. A small group of super-sellers (Goal, Costco, Walmart) are outperforming:

Shopper super-sellers: massive momentum
(QTD)
Costco                  up 12%
Walmart                up 12%
Goal                   up 8%

As a result of households are flush with money from financial savings and stimulus, shopper discretionary stays robust as shoppers proceed to repair up their properties, exit to eating places, and purchase cosmetics:

Shopper discretionary: shopper has money
(QTD)
Chipotle                up 21%
Domino’s Pizza     up 11%
Sherwin-Williams  up 11%
Mohawk                up 9%
Ulta Magnificence            up 7%

However meals and different staple names are all down, as shoppers are spending much less on meals at residence.

Shopper:  downward momentum
(QTD)
Campbell Soup    down 6%
Clorox                   down 7%
Kraft Heinz            down 7%
Brown-Forman      down 8%
Constellation         down 9%

Tech is the wild card. Delicate to larger charges, most tech names are performing in-line with the market, however mega-cap expertise (FAANG) is continuous to outperform:

Know-how: blended
(QTD)
Alphabet    up 13%
Apple        up 8%
Microsoft   up 7%
Broadcom  up 1.5%
Paypal  down 5%
Intel     down 4%
NVIDIA     down 1%

The underside line:  larger charges are serving to the markets look by way of the delta worries.

Nonetheless, August can nonetheless be a crapshoot, Chris Murphy, co-head of spinoff technique at Susquehanna, informed me. “August can go two methods. It will probably grind larger on no quantity. Or one thing shocking can occur and it might hole decrease.” 

Regardless, with the S&P up roughly 4% up to now six weeks, the “peak every little thing” story doesn’t appear to be exhausted but.  

“The reopening theme is once more catching maintain of the market,” Murphy informed me.



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