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From the Desk of Bob Centrella, CFA:                                                  August 2, 2021
 
 "Forza 2021 Survey - Midyear (July) Update" 
 
  
 
Dear Friends:
 
I hope you are all having a great summer and you and families are healthy.  It's been interesting watching the Olympics.  Congrats to all the athletes competing and to those bringing home a medal.  I remember watching the Olympics since I was a kid and still it's exciting to watch although with the time difference I now know some of the results before.  Would be nice to be able to bet after knowing who wins first!  It's also strange watching without many fans, let's hope that this is not a harbinger of things to come.  


I've had a few requests for a survey update, so I did a midyear update of where we are with the 2021 Forza survey.  I meant to send it out a week or so ago but never got around to it.  So, I moved the data to July 31st to update things more currently and have attached the results.  (The first page shows the original survey results and page 2 shows the rankings so far.)  Needless to say, our combined market prediction is way below where stocks are right now.  Take a look and see where you stand.  Congrats so far to Dan S who is out to a big lead.  Dan, I owe you a beer when I see you at the Club.  Let's see how things turn out over the next 5 months and who will claim their bottle of vino and bragging rights for a year.


Regarding the markets, it's been a great year so far for stocks with the S&P 500 up 17%, oil up 52% and bitcoin up 42% although it has had some wild swings.  But we are entering a notoriously weak 2-month period for stocks and the market has been up 6 months in a row, the longest streak since September 2018.  The primary reason for the continuing climb in stocks I believe are strong corporate profits.  So far, 88% of companies have beaten earnings estimates and EPS growth is 85% from the depressed quarter a year ago.  This is well above the 63% growth rate expected coming into the quarter.  Also, estimates are rising for the coming Q3 and year-end.  Of course, the wildcard remains the spread of the Delta Covid variant.  In my midyear update I mentioned this as the single biggest risk to markets and still see it as such.  


A pause in the markets would not be surprising and would be a good thing to consolidate gains and catch our breath.  So far this year, we've only had a few negative periods with the highest "correction" only being 4%.  If we do get some profit-taking I do believe it will be short-term and would be a decent buying opportunity all things being the same.  Let's see what the next few months bring as there is still a lot of cash on the sidelines waiting to be invested. Although Aug and Sept are seasonally weak months for stocks, the ability of investors to work from home may change that.  In the past, investors would go on vacation and close their books until they came back to the office in September. Often, selling had no buying to offset it.  Now, that might not be as much of an issue.  This will be an interesting 2 months.  A few other wildcards include an infrastructure spending bill and the fate of any capital gains or tax increases as the year progresses.  
I'll leave it there, enjoy the rest of the summer and stay safe!
 
Best,
 
Bob

 







  
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Bob Centrella, CFA
Managing Partner
Forza Investment Advisory, LLC





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