What’s Powering the Melt-Up and Why There’s More Upside Coming

|August 10, 2020

Because it’s my nature, and because it’s prudent, and because sometimes reality bites, for the last couple of months I’ve typically interspersed my positive assessment of equity markets and forecasts why they’re going higher, with negatives, citing pitfalls, white, gray, and black swans all around us.

Still, the forecasts have been bullish.

The only difference in today’s Capital Wave Forecast is I’m not going to caveat my bullish analysis. Not because the all-clear siren’s been sounded. Because you already know what’s out there lurking.

What’s underpinning markets and fueling their rise this earnings season (Q2: 2020) is the overwhelming number of “beats.”

So far, with 89% of companies reporting as of last Friday, 83% have beaten analysts’ earnings estimates.

While that’s a record, what’s a bigger record and more impressive is, they’ve beaten by an average of 22.4%. Also, impressive, though not a record, 64% have beaten revenue estimates.

All that good news, in spite of U.S./Chinese tech wrestling matches, drove the Dow up a whopping 3.8% last week, the S&P 500 up 2.5% to within 1% of its all-time highs, and the Nasdaq Composite up 2.5%, including hoisting it to yet another all-time high on Thursday.

Non-farm payrolls registering a gain of 1.763 million helped, coming in better than estimates for 1.48 million jobs gained.

Congress working another stimulus package helped, even though they couldn’t come together everyone knows something is coming, and until then the President must look compassionate and make some moves, which he did.

The Chinese not pushing back on the President trumping TikTok and WeChat was a positive.

Thin volume most of the week was a net positive.

About the Future

Mountains of ammunition piling up have given insiders a heads-up on the market’s prospects.

If you aren’t an insider, you will be now, because what capital waves have been building is important.

Massive waves of capital have been flooding, certainly not into equities, if you guessed I was going there, into bond markets, into fixed income mutual funds and ETFs. And money market funds.

I’ve dug through the numbers, the equity funds, fixed income and money market funds, bonds, you name it. There are low-yield money traps being set, and a lot of “dry powder” when it comes to debt, a lot of debt.

I’ve broken it all down in this week’s Money Map Report, and I also just released two brand new recommendations. You can check them out right here, it’s not too late to get into these trade opportunities before they take off.

Either way, yes, I’m still bullish. Yes, your Capital Wave Forecast is still bullish.

So, carry on.

Until then,

Shah Gilani


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