Strategy Zim 0221 Cta

Stock Market Outlook
Report
John J. Blank, Ph.D.
February/March 2021
IN THIS ISSUE:
Zacks February View On Equity Markets 2

U.S. Macro Outlook From San Fran Fed 7
Zacks Forecasts At A Glance 11
ZRS Chart Of The Month 57
Zacks Rank S&P500 Sector Picks 58
Zacks Rank February Industry Tables 60
February Sell-Side And Buy-Side Consensus 63
www.zackspcg.com | 1-800-701-9830
Born from Research, Built for Performance

STOCK MARKET OUTLOOK
1. Zacks February View on Equity Markets

U.S. Markets
Was the late January bout of U.S. stock weakness just ‘Sell-the-News’ trader action?
Sure. That’s a worthy insight.
Institutional traders were taking profits off the table, respecting very rich, fully priced in, stock market valua-
tions.
However, there was a lot of risk de-leveraging and capital building going on too, due to the Reddit Wall-
StreetBets social media stomp.
Looking ahead, hedge-fund Wall Street and this raging mass of retail stock traders are likely going to stay at
war. Getting capital reserves built up is a way to endure that stress. And cover the losses.
Even if your stocks are not in the crosshairs.
I. Click the next two hotlinks
Click on Reddit’s wallstreetbets trading room message board. Note it has now grown to hold 8.5 million
members on Feb. 4th. This number grew by 1 million over the last weekend of January (Jan. 30-31, 2021).
According to their own facts page,
“/r/wallstreetbets is a community for making money and being amused while doing it. Or realistically, a place
to come and upvote memes when your portfolio is down.”
Click this second link to gain the stock market religion. This concerns a key slice of the broader Reddit chat
narrative. 287K of these (3.7%) were Buying FDs, when I first looked in. This number grew by just 1K over
that Jan. 30-31 weekend.
FD is a slang acronym. (Best to click the link to find out what those two words are!!).
The hard-core options-buying part of the larger group call themselves this.
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II. This excerpt comes from that second hot link:

“FD’s is Wall Street Bets slang for out of the money options expiring within a week.
“They are very high risk and have a high chance of failure. But the small chance of success can have tremen-
dous upside. Basically, options give you the opportunity to buy 100 shares of a stock upon the expiration date.
“However, you don’t need to wait until the expirations date to make money. You can actually buy and sell op-
tions based on the current price of it. The price of an option is determined by its intrinsic value plus its time
premium.
“Since FD’s are usually out of the money there’s no intrinsic value to worry about accounting for.

“So, all of the price comes from time premium which in a weekly option should be close to zero.
“Wall Street betters are basically betting that the stock price will go above their strike price plus the cost of
the premium before the expiration date.
“If it does, they’ll make a ton of money since FD’s tend to be highly unlikely and if an option somehow does
meet the strike price then that wall street better just won the stock market lottery and can hit the fabled 10
bagger (1000% gain).”
Interesting, eh?
III. Let’s dig into this.

Firstly, this looks to be a leverage-on-leverage war of conquest.
This is the term for a military conflict where one state, nation, or people conquers or attempts to conquer an-
other.
According to the Wall Street Journal, the hedge fund shorter Melvin Capital lost -53% in January, hurt by
GameStop and other bets. Citadel, its partners and Point72 took losses from their investment in the hedge
fund. It started the year with about $12.5 billion and now runs ~$8 billion, including $2.75 billion in emergen-
cy funds.
Via CNBC, we have learned that short-selling hedge funds suffered a mark-to-market loss of $19.75 billion
YTD in the brick-and-mortar video game retailer GameStop, according to data they drew from S3 Partners.
Still, the short-sellers mostly are holding onto their bearish positions. Or they are being replaced by new
hedge funds willing to bet against the stock.
GME was trading at $300 a share in the Monday Feb. 1st premarket. It was $92 in the Feb. 4th premarket. I had
$60 on my screen during the Feb. 4th trading day.
Secondly, a separate, much nerdier, economist term to apply here is “contagion” (aka a rapid communication
of an influence).
Very likely, due to both the leverage and the contagion, knock-on effects from this Reddit discussion group
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are multiples larger than either the 7.8m or 288k numbers imply.
Exhibit A—
r/Wallstreetbets users have now bought GME billboards in New York City, San Diego, San Jose, Salt Lake
City, Orlando, Dallas, Austin, Oklahoma City and Colorado Springs. The list continues to grow.
Exhibit B—
According to Goldman Sachs Prime Services, last week represented the largest active hedge fund de-gross-
ing since February 2009.
Funds in their coverage sold long positions and covered shorts in every sector.
Thirdly, last week, Small Trader Call Buys to Open topped out at an almost unbelievable 87.3 million con-
tracts, with a value of $44.4 billion in terms of premiums spent.
8 million is a typical number for these types of option contracts traded!
Do this math appraisal. Divide $44.4 billion in call premiums by 288,000 FD buyers.
That computes to $152,777 for each FD.
That math doesn’t make sense, on the face of it. Some big institutional guys are in the mix. Or these FD guys
are all in, with their life savings, on a few select trades. Or there are really multiples more of these FD guys.
In sum, I think that “Buying FD” group did add to the downside stock market pressure.
However, the S&P500 index has a current market capitalization -- of somewhere in the range of $31.6 trillion.
That’s a big, big, big dog. Then add on the listed, liquid, U.S. smalls caps. Shorting is a bigger deal here. Then
add the stock trading universe outside the USA.
IV. In light of this diligence, my closing points
a. Enjoy trading individual stocks, amidst any volatility. Render your attention to nuances, inside this r/Wall-
StreetBets story.
Make sure you log onto that site yourself. 20- and 30-somethings are in on it, already.
b. Cement this in. 50 billion connected devices worldwide could be in play now. Cisco says as many as 6.5
devices per person in 2020.
This type of crowd action is likely a permanent feature of trading, much like it is to politics, fashion and sport.
c. Any screen-based numbers can hide the truth. I can provide one final, critical exhibit:
On Feb. 4th, the “Buying FD” crowd had indeed miraculously grown to 414K.
In an obvious social media assist, a huge surge in r/WallStreetBets daily users came along for the ride.
Starting Jan. 25th, right after the U.S. President’s inaugural. Consult that data below. The peak day? January
27th saw ~1.5 million new users.
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Source: Market Rebellion

As the Gamestop (GME) Share Price skyrocketed (right axis and the green line),
Gamestop Shorts shares outstanding plunged (left axis and the yellow line).
Source: S3 Partners, To Feb. 1st , 2021
Global Markets
I want to link up two matters in your mind. Bill Easterly is an NYU economics pro-
fessor. His field is development. The first matter is extraordinary progress made in
eradicating extreme poverty over the last 20 years. Consult the chart Bill uses in his
class below.
Page 5
Second, having shown you that, this rise of the poorest may have come at the expense of launching a major
advanced economy deflationary regime. That opened the door for the G10 central banks to do this flood on
money printing, without much in the way of consequences for nominal rates. This deep ‘secular’ factor keeps
global equities rising.
The chart below shows the G10 Central Bank Balance Sheet Size.
Page 6
3. Zacks Forecasts at a Glance

Top-Down S&P500 Yearend 2021 Targets
To Feb. 1st , the S&P500 YTD gain was +2.0%. Dec. 31st , 2020, the S&P500 annual gain was +18.4%, with a ma-
jority of that coming in the last two months of the year. That was an above average annual S&P500 return.
So, the major bull trend is fully intact, so far.
However, 2020 was volatile. Bears won during March 2020. Volatility can return in 2021.
Next, I have come up with a summary table, showing Zacks view on the path forward for the S&P500 large
cap index.
Fair Value at 5-yr Actual YE price of

“Bottom-up” S&P500 average forward 12M S&P500 and Zacks
Year Operating Earnings PE of 17.6 S&P500 Targets
2019 $163.12 2,871 2,954
2020 $138.89 2,444 3,668
2021 (est) $172.05 3,028 4,000
2022 (est) $198.54 3,494 3,850 to 4,400
Zacks Price Target for

“Bottom-up” S&P500 Zacks Call for S&P500 S&P500 proxied with a
Year Operating Earnings Operating Earnings 5-yr Avg. PE of 18
2019 $163.12 $163.12
2020 $138.89 $140.00
2021 (est) $172.05 $176.82 3,682
2022 (est) $198.54 $204.58 4,050
Label any excess over “Fair Value” or “proxies” we show as the “Fed Money Printing” effect!
Looking ahead to renewed mobility, bulls should play the 2020 job sector losers in 2021.
But already, much of any good news is priced in, and then some.
100% of major asset classes worked out in 2020. 4 of the last 5 years (2016, 2017, 2019, and 2020) were good
to long-term investors.
The following table shows specific industries that suffered from COVID fear and lockdowns.
These likely lead in 2021, post-vaccine.

Page 7
To confirm how unique that stable annual returns pattern is, next I show you major asset class
returns over the last 10 years, as of Dec. 31st , 2020.
Source: Charlie BiLello
Notably, late in 2020, a broad small-cap share price recovery happened, despite the fact that
U.S. shutdown orders hurt small banks and firms disproportionately. More forward-looking vac-
cine efficacy (and the coming 2021 distribution) stories dominated.
In the 2020 share price chart below, the purple line is the S&P500 index. The Orange line is the
Russell 2000 small cap index. You can see: small-caps ultimately outperformed last year.
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What About the Outlook for Underlying U.S. Economy?

This month, let’s consult the Congressional Budget Office (CBO) February 1st , 2021 article, “An Overview of
the Economic Outlook, 2021 to 2031.”
Click the hot link to access a great set of economic projection for calendar years 2021 to 2031 on page
2 of that key document. These nonpartisan economists are worth heeding.
The 2020–2021 coronavirus pandemic caused severe economic disruptions last year as households, govern-
ments, and businesses adopted a variety of mandatory and voluntary measures—collectively referred to
here as social distancing—to limit in-person interactions that could spread the virus. The impact was fo-
cused on particular sectors of the economy, such as travel and hospitality, and job losses were concentrated
among lower-wage workers.
Over the course of the coming year, vaccinations are expected to greatly reduce the number of new cases of
COVID-19, the disease caused by the coronavirus. As a result, the extent of social distancing is expected to
decline. In its new economic forecast, which covers the period from 2021 to 2031, the Congressional Budget
Office therefore projects that the economic expansion that began in mid-2020 will continue (see Table 1).
Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its pre-pandemic
level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s
projections, the unemployment rate gradually declines through 2026, and the number of people employed
returns to its pre-pandemic level in 2024.
CBO is using this economic forecast as the basis for updating its budget projections for 2021 to 2031. The
agency plans to release those budget projections later in February and a more detailed report about this
forecast later this winter. The forecast incorporates economic and other information available as of Janu-
ary 12, 2021, as well as estimates of the economic effects of all legislation (including pandemic-related legis-
lation) enacted up to that date.
The Economic Outlook for 2021 to 2025
In CBO’s projections, which incorporate the assumptions that current laws governing federal taxes and
spending (as of January 12) generally remain in place and that no significant additional emergency funding
Page 9
or aid is provided, the economy continues to strengthen during the next five years.
• Real GDP expands rapidly over the coming year, reaching its previous peak in mid-2021 and surpassing its
potential level in early 2025. The annual growth of real GDP averages 2.6 percent during the five-year period,
exceeding the 1.9 percent growth rate of real potential GDP (see Figure 1).
• Labor market conditions continue to improve. As the economy expands, many people rejoin the civilian
labor force who had left it during the pandemic, restoring it to its pre-pandemic size in 2022.1 The unemploy-
ment rate gradually declines throughout the period, and the number of people employed returns to its pre-
pandemic level in 2024.
• Inflation, as measured by the price index for personal consumption expenditures, rises gradually over the
next few years and rises above 2.0 percent after 2023, as the Federal Reserve maintains low interest rates
and continues to purchase long-term securities.
• Interest rates on federal borrowing rise. The Federal Reserve maintains the federal funds rate (the rate that
financial institutions charge each other for overnight loans of their monetary reserves) near zero through
mid-2024 and then starts to raise that rate gradually. The interest rate on 3-month Treasury bills closely.
The dual chart below shows the CBO’s timeline for GDP from 2021 onwards to 2031…
What of the COVID situation?
Israel is leading the vaccine race, by a country mile. Well 55% of the total population had been vaccinated
from Dec. 19th to Jan 31st. Consult the chart below.
Page 10
But the U.K. and the U.S.A. are moving swiftly. Europe is the issue. They lag.
In terms of Israel’s actual success in taking out COVID infections and hospitalizations?
Consult the following set of charts.
We can say with caution, the magic has started. Note the blue lines in the four top charts. These are Israel’s
60+ years old (the very first to vaccinate), in the past 2 weeks:
~35% drop in cases

~30% drop in hospitalizations
~20% drop in critically ill
This data is even stronger than the data of their younger people and was not seen during Israel’s previous
lockdown.
What about the value of prior lockdowns? They were worth it, in terms of saving lives.
Next, I show performance of “laissez faire” Sweden versus its neighbors to Feb 1st.
Finland: 677 total deaths and 122 people/million deaths of 18 people per square KM.
Norway: 567 total deaths and 104 people/million; deaths of 15 ppl per square KM.
Sweden: 11,591 total deaths and 1,144 people/million deaths of 24 ppl per square KM.
Page 11
Source: Eran Segal, scientist at the Weizmann Institute

Updated on Jan. 29th, 2021, the U.S. Center for Disease Control (CDC) received forecasts of COVID-19
deaths over the next 4 weeks from 38 modeling groups.
Of the 38 groups, 33 provided forecasts for both new and total deaths, two groups forecasted total deaths
only, and three forecasted new deaths only.
This national ensemble forecast predicted the number of newly reported COVID-19 deaths will likely de-
crease over the next 4 weeks, with 13,500 to 25,000 new deaths likely reported in the week ending Febru-
ary 20th, 2021.
The national ensemble predicts a total of 479,000 to 514,000 COVID-19 deaths will be reported by this date.
The state- and territory-level ensemble forecasts predict that over the next 4 weeks, the number of newly
reported deaths per week will likely decrease in 10 jurisdictions, which are indicated in the forecast plots
below.
Trends in numbers of future reported deaths are uncertain or predicted to remain stable in the other states
and territories.
Page 12
In terms of underlying earnings, major USA publicly-listed firms have serious fundamen-
tal ground to recover in 2021.
As of Jan. 29th, Q4-20 earnings for the S&P500 companies look to be down -2.3%. If is holds, it
will mark the 4th straight quarter in which the index reported a y/y decline in earnings.
Q1-2021 is tracking S&P500 earnings growth at +19.6%.
The estimated (year on year) EPS growth rate for the S&P500 for 2021 is +23.6%. This is double
the 10-year average (annual) EPS growth rate of +10.0%.
If +23.6% is the actual growth rate for 2021, it will mark the largest annual EPS growth rate for
the index since 2010 (+39.6%).
That unusually large 2021 growth rate can be attributed to both an easy comparison to :
z Weak EPS in 2020 due to COVID and

z Expected improvement in EPS in 2021
How did the markets price all of this?
Page 13
Next are January 2021 YTD S&P 500 sector returns:
4 early winners were:

z Energy $XLE: +3.6%
z Health Care $XLV: +1.3%
z Real Estate $XLRE: +0.5%
z Consumer Discretionary $XLY: +0.4%
7 losers were:
z Info Tech $XLK: -1.0%
z Utilities $XLU: -1.0%
z Financials $XLF: -1.9%
z Communication Services $XLC: -1.5%
z Materials $XLB: -2.4%
z Industrials $XLI: -4.3%
z Cons. Staples $XLP: -5.3%
This month, thru the end of January, Zacks Sector Ranking had four sectors at Very Attractive; Info Tech,
Materials, Industrials and Financials.
There were numerous Zacks Industry Rank upgrades to the most globally exposed groups inside Info Tech
and the globally-important Materials space.
Financials held up in terms of rankings. That sector was Very Attractive again.
In sum, February Zacks Sector Ranks showed top-down investors a pro-cyclical stack:
z Info Tech, Materials, Industrials, and Financials led
z Consumer Staples, Consumer Discretionary & Health Care are in the middle
z Telcos, Energy and Utilities are at the back
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Energy oil price fundamentals are managed by OPEC+. The WTI oil price benchmark went from $60 a barrel
in January to below zero a barrel on April 20th. That price has rebounded to $55 a WTI barrel on February 2nd.
Strong prints in global manufacturing PMIs? They continue to make a bull case for Energy, Info Tech, Mate-
rials and Industrials.
What’s ‘Fair Value’ on the S&P500?
Always stay up-to-speed. Apply this forward-looking COVID19 earnings landscape…
With the turn of the calendar year, it is time to study 2021… even 1H-2022.
Focus on cyclical sectors.
These stocks come to life, even more, once more effective vaccine distribution rolls out.
z Industrials (+90.5%)
z Consumer Discretionary (59.8%)
z Materials (+31.1%)
z Financials (+21.6%)
z Info Tech (+16.3%)
z Communication Services (+12.3%)
z Health Care (+11.6%)
z Consumer Staples (+6.1%)
z Real Estate (+4.0%)
In sum, play cyclicals on a 2H-21 EPS take-off. That is the 12-month forward bull play.
However, the pandemic is not over. Far from it.
Regardless, carry on with regularly-spaced, overweight equity asset allocations. The Fed has share buyer’s
backs. Respectable stocks are the way to go.
Consensus “bottoms-up” revenue growth projections for 2021 show us a +7.9% rise.
Along with that, 2021 annual earnings should snapback +22.1%.
S&P500 “Bottom’s Up” consensus shows us a steady rise across the quarters of 2021.
Q4-19 $41.80
Q1-20 $33.35
Q2-20 $28.25
Q3-20 $39.41
Q4-20 $39.54
Q1-21 $38.87
Q2-21 $41.29
Q3-21 $44.85
Q4-21 $46.57
Q1-22 $45.07
Page 15
Zacks “fair value” earnings call is based on a full-year 2021 forward look ($170). Adding on a huge dollop of
Fed-driven valuation upside.
Zacks thinks 4,000 on the S&P500 by the end of 2021 is a fair early target.
Last year, very bullish top-down Wall Street strategists called for the S&P500 to end 2020 trading at 3,450. It
ended at 3,756.
The early 2021 “bottoms-up” call is for the S&P500 to reach 4,251 in 12 months.
To actively compute “fair value” valuations, factor in earnings growth ahead, like the stock market does, 6 to
12 months.
Pre-COVID “Bottoms-up” analysts summed S&P500 earnings to $163.02 in 2019. Analysts expect to see
$138.89 for 2020, $172.05 in 2021 and $198.54 in 2022. A 12-month look ahead at the moment? Just use 2021
to keep it simple.
The S&P500 trades around 3,800 on February 2nd. Divide this by $172 = 22.1. That’s one factcheck on current
S&P500 valuation.
A S&P500 forward 12-month P/E at (21.8) is well above the 5-yr average (17.6) and the 10-yr average (15.8).
On stocks in February 2021? Stick with your overweight allocations.
The VIX volatility index popped with this Reddit short selling game. On Jan. 25th the VIx was 23.2. On Jan. 27th,
the VIX popped to 37.2. On Feb. 2nd, it was back to 27.4.
I had the VIX at 22.75 on Dec. 31st , 2020.
Across 2019, the pre-COVID VIX volatility index was trading at 12.
Still bullish? OK. But accept this. The VIX is nearly double what it was in 2019. It can pop higher again, and
again. If it spikes again, and then declines, this marks a good entry point.
In closing: Global bond buying support in 2021 and the U.S. Federal CARES stimulus follow-up (and their
analogues across the globe) are driving bull market factors.
We shall see the U.S. Fed, the People’s Bank of China (PBoC), the Bank of Japan (BoJ) & Europe’s ECB buy all
types of debt in 2021 and beyond
Money printing drives stock prices, well beyond any projections for EPS growth.
Gratis Jurrien Timmer at Fidelity, the latest stock market Sentiment was mapped for us.
His following chart shows the S&P500 from Dec-18 to Jan-21. It also shows the number of call options in
purple and the number of put options in grey, at the bottom.
“What to expect next? Are we near a major market top? For sure, 1999-2000 comes to mind for many inves-
tors. Yes, periods of speculation have often led to tops. But, in this case. It’s my view that it doesn’t necessar-
ily mean one is imminent. It could be months or years away…”
Page 16
Setting U.S. returns expectations for 2021

In February 2021, U.S. shutdowns are loosening up, as the vaccination race speeds up., across all of the indi-
vidual states.
Regardless of the underlying U.S. or global economy, what happens to S&P500 returns in 2021 can still look
like annual stock market bull runs in year’s past. Mr. Market always rules, and he sees the money printing.
Look back at S&P500 sector returns across the 11-year-long bull market (below).
Source: Charlie BiLello
Page 17
For bears, at the moment, I see just 3 S&P500 sectors with negative Q1-21 earnings marks. Real Estate is at
-1.1%, Industrials are at -16.7% and Energy is at 35.5%.
Eight S&P500 sectors have positive Q4 revenue outlooks: Consumer Discretionary is at +92.1%. Financials
is at +64.9%. Materials is at +34.3%. Health Care is at +18.3%. Info Tech is at +18.0%. Utilities is at +0.6%.
Comm. Services is at +8.7%. Consumer Staples is at +0.6%.
Again, the Fed is what propels stocks. It will NOT be Q1-21 earnings and revenue “Beats” that will propel
stocks.
Traders look much further ahead to the rest of 2021 and 2022. Like they always do.
Keep a massive $7T in Fed liquidity front-and-center.
Then, the $908B CARES act follow-on.
Hope builds for even more rapid distribution of MANY successful vaccines.
We need a number of Health Care systems (in the advanced countries) to successfully and quickly distrib-
uted these too.
What Produces 2021 Optimism?
First, bulls celebrate the multiple vaccine approvals, 95% efficacy rates, and booster shots. Along with
marked improvement in testing and treatment for this novel virus.
Second, with a new experienced U.S. administration, Public Health advisory and cooperation surely im-
proves, internally across states and externally across countries.
Third, we have an uber-dovish Fed. We have dovish central banks outside the USA.
Fourth, we have $908 billion in spending added to U.S. unemployment paychecks, PPP loans to small busi-
nesses, and a mélange of other COVID needs.
Fifth, 2021 offers the stock trader underpinning fundamental snapbacks; with upgrades to earnings and rev-
enue growth rates.
Latest estimates show 2021 offers S&P500 EPS growth of +23.6% and annual revenue growth of +8.7%. 2022
offers +15.9% EPS growth and +6.9% revenue growth.
In hindsight, look at the last 3 years:
z In 2020, the S&P500 is now at: -16.4% EPS growth and -2.2% revenue growth.
z In 2019, the S&P500 got pumped higher by Fed rate cuts and Fed repo buying. The China trade war
was a bust, and the Fed knew it.
Page 18
z In 2018, the S&P500’s +20% earnings growth and +9% revenue growth were a struggle for risk takers.
The markets spooked about overheating and higher interest rates. The corporate tax cuts were seen
as a one-off event.
Sixth, recognize: Entering the virus crisis, U.S. corporates maintained stronger revenue growth and higher
profit margins vis-à-vis the rest of the advanced world.
Seventh, key U.S. sector fundamentals continue to benefit from ongoing catalysts --
z Remote working accelerates demand for chips, certain software, and cloud-based, or in-situ, com-
puter storage support.
z Business equipment & structures investment is rising. CEOs and CFOs are in a decent place. They are
optimistic, starting with 2H-2021 or 1H-2022.
z Semiconductor IoT (Internet of Things) developments hold attractive implications.
z Aging demographics builds Medical Care demand. Ditto health-exchange and health insurance ex-
pansions.
What to make of -2.6% U.S. earnings growth showing up for Q4-20 earnings season?
z Q1-2021 shows EPS growth of +15.6% and revenue growth of +3.5%

z Q2-2021 shows EPS growth of +45.2% and revenue growth of +12.4%
In short, traders see rosier coming annual earnings growth rates, as do analysts.
The forward 12-month P/E rests at 21.8. Yes. That P/E metric is much worse than the 5-year average at 17.6
and the 10-year average at 15.8. But Mr. Market (full of retail and momentum traders) can play a bullish share
price trend, not the current poor data.
Many analysts remain too pessimistic. On Wall Street, it pays to keep your head down.
The COVID story? Really folks. That saga comes to an end the next five or six months.
What’s Alive for 2021 Pessimists?
COVID! Last year’s earnings recession led us into a dramatic earnings plunge in Q2-20.
That’s an obvious bear case in Q4. But Fed money printing pleasantly hides it.
z For Q4 2020, “bottoms-up” analysts see S&P500 earnings growth of -2.3% and revenue growth of
+2.7%
z For annual 2020, analysts moved up S&P500 earnings growth to -12.1% and revenue growth up to
-1.3%
From here, worries can dramatically increase about financial losses reeling out of office and retail America,
into the banks. Then loan losses can beat up share and bond markets. A rise in fears (founded and unfound-
ed) can lead to a U.S. share pullback.
Page 19
Both High Yield and Investment grade credit would blow out without the Fed backstop.
Other big risks lie hidden. Inside a rosy 2017 to 2019 corporate and real estate lending environ-
ment, without being widely appreciated.
Don’t forget this: Too much cheap money for too long. Years and years of it.
The surge in Bitcoin prices has recently seemed to be on the decline. Others see a bull flag.
A surge in new subscribers on the Bitcoin Sub-Reddit shows interest exploding (consult the
chart below).
New Subscribers to the #Bitcoin Sub-Reddit Message Board
Source: The Block
As part of this, I previously noted a huge surge in “Retail” e-trading growth in 2020. There has
also been a mania seen on SPAC equity IPO issuance too (see chart below).
Page 20
A special purpose acquisition company (SPAC) is a “blank check” shell corporation designed to take compa-
nies public without going through the traditional IPO process. SPACs allow retail investors to invest in pri-
vate equity type transactions, particularly leveraged buyouts.
In short, the latest bout of “cooped-up” euphoria has exceeded the Dot-com boom.
Cell phone, app-driven, social media obsessed MOMO traders love to buy and sell flashy growth names in a
day or week trade.
This has been best exemplified by Tesla (below). If this company misses big on earnings consensus on a
quarterly earnings report? Lookout below!
On top of that, big institutional short sellers can take names like this down — at any time.
Is it time to buy U.S. stocks in early February?
I am neutral. The S&P500 is 3,800. COVID vaccines roll out. A 21.8 forward P/E is rich.
But Zacks strategists (including me) stay bullish. The S&P500 can reach 4,000 at yearend 2021.
Over the 2 years before COVID hit, markets HAD to climb two walls of related worry: trade wars and reces-
sion fear.
Now, stock market traders and investors look past a variety of Public Health driven suppressions to some
type of Public Health recovery.
This U.S. macro snapback is looking K-shaped, not V-shaped; meaning there are two tracks, not one.
z Bulls rosily envision 2021 U.S. and global EPS snapbacks

o For 2021, analysts project S&P500 EPS growth of +23.6% and revenue growth of +8.7%
o Q4-20 EPS estimates are at -2.3%
o Q1-21 EPS estimates are at +19.6%
o Q2-21 are up to +48.7% and Q2-21 revenue growth at +15.1% Page 21
z Bears? They recall earnings slowdown signals across 2020, and then, they bring up
the COVID nightmare brewed up this winter season
Here’s the mantra — Don’t fight the Fed. Don’t fight the ECB in Europe, the BoE in the U.K., the
BoJ in Japan, and the People’s Bank of China (PBoC). All major central bank players brought
out the “anything goes” monetary policy artillery.
Early in 2020, with their internal virus shutdown underway, Chinese authorities ramped up
monetary support. The world followed suit. U.S. and non-U.S. money authorities will stay
uber-accommodative and creative in 2021 and beyond.
A (major and now confirmed) fundamental bull case is for rapid and successful mass global
vaccination against the novel virus. The medical science world, infused with modern genomic
thinking, is beating expectations.
z Bears see another -10% to -30% downside from here, with spreading deep growth
negatives across U.S. and international markets sticking around across both 1H-2021
and 2H-2021
This is due to unseen virus mutation shut-downs, a permanent swath of service firm bank-
ruptcies, and massive job losses from the coronavirus.
Any consumption recovery can easily become more distant. In certain countries, the medi-
cal/hospital world can get overwhelmed by 3rd wave cases for months.
Caution will prevail for the physical retail shopper.
As for the vaccine dream? It is reality, for a number of players. Approvals too. But what about
the distribution timeline? And people who flat don’t get the vaccine?
There are negative side effects to money printing too. Consult the chart next…
o The top 1% own 52.4% of corporate equities and mutual funds.

o The bottom 50% own 0.6%.
Page 22
A widening income inequality gap is a worldwide phenomenon, fueled by central bank intervention —
whether Fed driven or central bank driven outside the USA.
The Fed insists their policies absolutely do not add to inequality.
But if you do not own stocks, you do not benefit from the broad increase in share prices, achieved by cheap
money.
z Range-bound sages will mostly note broad and deep bond market sedation. “TINA” is short for There
is No Alternative. Domestically, the 10-year U.S. Treasury rate is still very low at 1.12%, even after the
Georgia election results. U.S. consumer inflation still likely stays under the Fed’s statutory target.
The $908B U.S. CARES follow-on act may not assist afflicted firms and unemployed people enough.
Ditto a number of European packages, the Japanese fiscal support and South Korea’s interventions,
etc.
The positives:
U.S. corporate balance sheets aren’t extended like 2008. Presciently, before entering the Suppression Reces-
sion, the U.S. economy marked up stagnant levels of capital investment. CEOs and CFOs weren’t buying the
euphoria, the way stock markets did.
In February 2020, the U.S. 3.6% unemployment rate was near a 50-year low. That record low household un-
employment rate should have given consumers a helping hand.
In April 2020, the rate was 14.6%. We got to 10.2% in July 2020, sooner than expected.
A 6.3% is here in January 2021. A 6.7% household unemployment rate stuck with us across Nov. and Dec. of
2020.
Consumer interest rates stay historically low, in particular, home mortgage rates. Auto and home purchases
are atypically strong in a recession. Home improvement is booming.
Obamacare enrollment supports more coronavirus victims.
The negatives:
A U.S. and global growth struggle can deepen and deepen.
U.S. federal deficits were already above $1 trillion a year before the virus crisis. This exploded with another
$3T in spending support and financial market stabilization. And another $2T of debt finance will likely arrive
to fund stimulus after January 20, 2021.
U.S. consumers likely stay cautious. Many are fearful to go out and spend. EPS numbers 1H-2021 can plunge–
more than even pessimistic perma-bear forecasts.
These factors would make the current 2021 optimism look silly.
Page 23
What of U.S. GDP Growth?
The Atlanta Fed Nowcast for Q1-21 models a +6.0% GDP growth rise on February 1st:
z Q4-20 was up +4.0% (the first estimate)

z Q3-20 was down -33.1%
z Q2-20 was down a final -31.4%
z Q1-20 was down a final -5.0%
Q4-19 was up +2.1%. Q3 was up +2.1%. Q2 was up +2.0%. Q1 was up +3.1%.
I used to write this note: +1.0% in GDP growth over a year is when recession selling triggers. That is indeed
what happened in 2020, and in record time.
z 2021 annual GDP growth sits at +4.0%. December Consensus Economics data
z 2020 annual GDP growth consensus is at -3.6%
z 2019 annual GPD growth consensus was +2.3%
z 2018 annual GDP growth finished at +2.9%
z 2017 annual GDP growth was at +2.2%; notably stronger than 2016 at +1.6%
For 2020, Zacks call is for 1 +4.4% GDP growth in 2021; in line with the Jan 2021 Consensus Economics av-
erage. For 2021, we will mark a +4.4% snapback. For 2022, that same consensus shows a +3.4% real GDP
growth rate. Prior to shutdowns, Zacks economists modeled a trend +2.1% to +2.3% U.S real GDP growth
rate.
Don’t overdo the 2021 earnings and GDP growth snapbacks. Any surprises to that consensus, positive
or negative, is what matters now. Not the snapback.
Realize. The new U.S. administration will not embellish macro and stock market facts. There should still be
lingering trader concern, on the spread of the coronavirus, deeper effects from U.S. tariffs, aggressive Iranian
or North Korean, or Chinese military belligerence, $3T annual federal fiscal deficit spending, presidential
credibility, and a total lack of bipartisanship.
Job Market:
On January 8th, we learned U.S. total nonfarm payroll employment for December fell -140K. November jobs
were revised up +91K to +336K. October jobs were revised up +44K to a final +654K. It was a wash. Prior
Page 24
month revisions matched December’s fall.
z September revised up to a final +711K.

z August showed us +1.49M additions. July was +1.76M. June had +4.8M adds. May
had +2.7M adds. April gave up -20.8 million job losses.
The lagging household unemployment rate sunk from 13.3% in May. That lagging rate was
6.7% in November and December 2021. It then sunk to 6.3% in January 2021.
“The labor market continued to reflect the impact of the coronavirus pandemic and efforts
to contain it. In January, notable job gains in professional and business services and in both
public and private education were offset by losses in leisure and hospitality, in retail trade, in
health care, and in transportation and warehousing.”
– wrote the B.L.S. on February 5th, 2021.
With 20 million unemployed, a late December 2020 fiscal package had to pass. A newer
successful 51-50 vote on $1.9T in new stimulus will help this afflicted group the most.
According to Greg Daco at Oxford Economics on February 4th, 2021 — The decline in the
number of regular weekly unemployment benefit claimants over the past few months is a
positive, but:
z Since November, we made no progress toward lower levels of unemployment

z ½ the decline in regular claims represented people moving to extended benefits
z Pandemic Emergency Assistance (PUA) claims numbers are still very high
The Job Openings and Labor Turnover Survey (JOLTS) tells us how many job openings
there are each month. AKA, how many workers were hired, how many quit their job,
how many were laid off, and how many experienced other separations (including worker
deaths).
Job Opening and Labor Turnover Survey (JOLTS), from 1/2010 to Feb. 2021 (MM)
Source: Bureau of Labor Statistics

Page 25
What should you think about COVID era jobs data?

Don’t waste time on broad details. There is only ‘new’ stock trading news inside these types of reports, not in
headline jobs data. Look at Leisure & Hospitality, for example.
Update on U.S. fiscal stimulus: $1.9T passed 51 to 50 on Feb. 5th

Here’s what’s in the “American Rescue Plan” (written by CNN on Jan. 15th, 2021):
Beefed-up stimulus payments
The plan calls for sending another $1,400 per person to eligible recipients. This money would be in addition
to the $600 payments that were approved by Congress in December and sent out earlier this month — for a
total of $2,000.
The new payments would go to adult dependents that were left out of the earlier rounds, like some children
over the age of 17. It would also include households with mixed immigration status, after the first round of
$1,200 checks left out the spouses of undocumented immigrants who do not have Social Security Numbers.
Enhanced unemployment aid
Biden would increase the federal boost the jobless receive to $400 a week, from the $300 weekly enhance-
ment contained in Congress’ relief package from December.
He would also extend the payments, along with two key pandemic unemployment programs, through Sep-
tember. This applies to those in the Pandemic Emergency Unemployment Compensation program who have
exhausted their regular state jobless payments and in the Pandemic Unemployment Assistance program,
which provides benefits to the self-employed, independent contractors, gig workers and certain people af-
fected by the pandemic.
Lawmakers only provided an additional 11 weeks of support in the December package, which will last until
March.
Rental assistance and eviction moratorium
The plan would provide $25 billion in rental assistance for low- and moderate-income households who have
lost jobs during the pandemic. That’s in addition to the $25 billion lawmakers provided in December.
Another $5 billion would be set aside to help struggling renters to pay their utility bills. Biden is also calling
for $5 billion to help states and localities assist those at risk of experiencing homelessness.
The plan would extend the federal eviction moratorium, set to expire at the end of January, to September 30,
as well as allow people with federally-guaranteed mortgages to apply for forbearance until September 30.
Help for the hungry
Biden would extend the 15% increase in food stamp benefits through September, instead of having it expire in
June. He would invest another $3 billion to help women, infants and children secure food, and give US territo-
ries $1 billion in nutrition assistance. And he would partner with restaurants to provide food to needy Ameri-
cans and jobs to laid-off restaurant workers.
Page 26
More money for child care and child tax credits
The plan calls on Congress to create a $25 billion emergency fund and add $15 bil-
lion to an existing grant program to help child care providers, including family child
care homes, to pay for rent, utilities, and payroll, and increased costs associated
with the pandemic like personal protective equipment.
It also proposes expanding the child care tax credit for one year so that families will
get back as much as half of their spending on child care for children under age 13.
A temporarily increase of tax credits
Biden wants to boost the Child Tax Credit to $3,600 for children under age 6 and
$3,000 for those between ages 6 and 17 for a year. The credit would also be made
fully refundable.
And he proposes to raise the maximum Earned Income Tax Credit for a year to
$1,500 for childless adults, increase the income limit for the credit to about $21,000
and expand the age range of eligibility to cover older workers.
Both of these are aimed at supporting low-income families, including millions of

essential workers.
Subsidies for health insurance premiums
Biden is also calling on Congress to subsidize through September the premiums of

those who lost their work-based health insurance.
He wants to increase and expand the Affordable Care Act’s premium subsidies so
that enrollees don’t have to pay more than 8.5% of their income for coverage —
which is also one of his campaign promises. (The law is facing a challenge from
Republican-led states that is currently before the Supreme Court.)
Also, he wants Congress to provide $4 billion for mental health and substance use
disorder services and $20 billion to meet the health care needs of veterans.
Restoration of emergency paid leave
The plan would reinstate the paid sick and family leave benefits that expired at the
end of December until September 30.
It would extend the benefit to workers employed at businesses with more than 500
employees and less than 50, as well as federal workers who were excluded from
the original program.
Under Biden’s proposal, people who are sick or quarantining, or caring for a child
whose school is closed, will receive 14 weeks of paid leave. The government will
reimburse employers with fewer than 500 workers for the full cost of providing the
leave.
More assistance for small businesses

Page 27
The plan calls for providing $15 billion to create a new grant program for small business owners, separate
from the existing Paycheck Protection Program.
It also proposes making a $35 billion investment in some state, local, tribal and non-profit financing pro-
grams that make low-interest loans and provide venture capital to entrepreneurs.
Aid for states and schools
Biden wants to send $350 billion to state, local and territorial governments to keep their frontline workers
employed, distribute the vaccine, increase testing, reopen schools and maintain vital services.
Asked during a call with reporters whether states could use the funds to offset declines in tax
revenue spurred by the pandemic, a senior Biden administration official did not clarify. The aid is intended to
be flexible, an official told CNN later.
Additional assistance to states has been among the most controversial elements of the congressional rescue
packages, with Democrats looking to add to the $150 billion in the March legislation and Republicans resist-
ing such efforts. The December package ultimately dropped an initial call to include $160 billion.
Biden’s plan would also give $20 billion to the hardest-hit public transit agencies to help avert layoffs and the
cutting of routes.
The plan would provide an additional $170 billion to K-12 schools, colleges and universities to help them
reopen and operate safely or to facilitate remote learning.
Congress approved $82 billion in aid for schools in December.
Increased support for vaccines and testing:
The plan calls for investing $20 billion in a national vaccination program, including launching community
vaccination centers around the country and mobile units in hard-to-reach areas. Biden would also increase
federal support to vaccinate Medicaid enrollees.
The proposal would also invest $50 billion in testing, providing funds to purchase rapid tests, expand lab
capacity and help schools implement regular testing to support reopening.
It would also fund the hiring of 100,000 public health workers, nearly tripling the community health work-
force. It would address health disparities by expanding community health centers and health services on
tribal lands. And it would provide support to long-term care facilities experiencing outbreaks and to prisons
for mitigation strategies.
A $15 hourly minimum wage:
Biden is calling on Congress to raise the minimum wage to $15 an hour, and to end the tipped minimum
wage and the sub-minimum wage for people with disabilities.
The latest United States ISM manufacturing PMI

The Institute for Supply Management (ISM) told us the USA December PMI registered 60.7%, up 3.2 percent-
age points from the November reading of 57.5%.
50 denotes expansion.
Page 28
“The December Manufacturing PMI® registered 60.7 percent, up 3.2 percentage points from the November
reading of 57.5 percent.
“This figure indicates expansion in the overall economy for the eighth month in a row after contracting in
March, April and May, which ended a period of 131 consecutive months of growth.
The New Orders Index registered 67.9 percent, up 2.8 percentage points from the November reading of 65.1
percent.
The Production Index registered 64.8 percent, an increase of 4 percentage points compared to the Novem-
ber reading of 60.8 percent.
The Backlog of Orders Index registered 59.1 percent, 2.2 percentage points higher compared to the No-
vember reading of 56.9 percent.
The Employment Index returned to expansion territory at 51.5 percent, 3.1 percentage points higher from
the November reading of 48.4 percent.
The Supplier Deliveries Index registered 67.6 percent, up 5.9 percentage points from the November figure
of 61.7 percent.
The Inventories Index registered 51.6 percent, 0.4 percentage point higher than the November reading of
51.2 percent.
The Prices Index registered 77.6 percent, up 12.2 percentage points compared to the November reading of
65.4 percent.
The New Export Orders Index registered 57.5 percent, a decrease of 0.3 percentage point compared to the
November reading of 57.8 percent. The Imports Index registered 54.6 percent, a 0.5-percentage point de-
crease from the November reading of 55.1 percent.”
Fiore continues, “The manufacturing economy continued its recovery in December. Survey Committee mem-
bers reported that their companies and suppliers continue to operate in reconfigured factories, but absen-
teeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing
strains that are limiting manufacturing growth potential.
“However, panel sentiment remains optimistic (three positive comments for every cautious comment), an
improvement compared to November.
Demand expanded, with the (1) New Orders Index growing at a strong level, supported by the New Export
Orders Index expanding, (2) Customers’ Inventories Index remaining in ‘too low’ territory and at a level con-
sidered a positive for future production, and the (3) Backlog of Orders Index achieving a 2½-year high.
Consumption (measured by the Production and Employment indexes) contributed positively (a combined

7.1-percentage point increase) to the Manufacturing PMI® calculation. The Production Index hit a 10-year
high, as the last reading above 64.8 percent was in January 2011 (65.3 percent), with five of the top six indus-
Page 29
tries reporting moderate to strong expansion. The Employment Index moved into expansion after a single
month of contraction, due to the inability to attract and retain direct labor.
Inputs — expressed as supplier deliveries, inventories and imports — continued to indicate input-driven
constraints to production expansion, at higher rates compared to November, as indicated by minimal gains
in inventory levels and difficulties in expanding imports. Supply chains continue to struggle compared to
November, contributing moderately to the Manufacturing PMI® calculation. (The Supplier Deliveries and In-
ventories indexes directly factor into the Manufacturing PMI®; the Imports Index does not.) The Prices Index
jumped dramatically in December, to a level last reached in the summer of 2018, the peak of the last manu-
facturing expansion cycle.
“All six of the biggest manufacturing industries — Fabricated Metal Products; Computer & Electronic Prod-
ucts; Transportation Equipment; Chemical Products; Petroleum & Coal Products; and Food, Beverage &
Tobacco Products — registered moderate to strong growth in December.
“Manufacturing performed well for the seventh straight month, with demand, consumption and inputs regis-
tering strong growth compared to November. Labor market difficulties at panelists’ companies and their sup-
pliers will continue to restrict the manufacturing economy expansion until the coronavirus (COVID-19) crisis
ends,” says Fiore.
What ISM respondents were saying
“Our company and industry are continuing to have tailwinds from the COVID-19 pandemic research support
for vaccines and treatments. While our services are delayed, many customers are not cancelling outright,
and business picked up for us in the last month — especially in China, where business growth is back on
track.” (Computer & Electronic Products)
“Continued to survive COVID-19 shutdowns, customer restrictions and personnel issues (work from home
and COVID-19 outbreaks) and managed to maintain slight growth over 2019.” (Chemical Products)
“COVID-19 outbreaks are causing supply chain issues for Tier-1 and Tier-2 suppliers. More work needs to
ensure suppliers keep us in the loop with any problem in their supply chain. But end-customer demand for
products is keeping production and future outlook positive.” (Transportation Equipment)
“COVID-19 is affecting us more strongly now than back in March. Vendors/service suppliers unable to main-
tain levels of service due to employee shortages. Logistic issues also hurting us due to coronavirus-related
problems.” (Food, Beverage & Tobacco Products)
“Current business outlook is strong through the first quarter of 2021. We are anticipating 20 percent growth
in sales for 2021.” (Fabricated Metal Products)
“Sales are now slightly above pre-COVID-19 sales.” (Machinery)
“Sales are now exceeding pre-COVID-19 levels, but uncertainty remains through the winter months while
COVID-19 is still rampant.” (Miscellaneous Manufacturing)
“Business is stronger than expected, with higher demand for many products. Volatility continues due to the
Page 30
very persistent pandemic and associated risks.” (Electrical Equipment, Appliances & Components)
“Suppliers are having difficulty finding and retaining labor leading to supply constraints.” (Plastics & Rubber
Products)
“Fourth-quarter production improved more than anticipated, both against the rolling forecast and compared
to typical Q4 business.” (Primary Metals)
Of 18 U.S. ISM manufacturing industries, 16 reported growth in December.

Status of global energy markets
z On February 2nd, 2021, WTI oil prices are $55.07 per barrel. Done on December 1st, 2020, the March
2022 consensus for WTI stood at $51.12 per barrel.
z Not giving energy bulls help, no related industrial commodities in January 2021 show upside in for-
ward 12M (Copper -6.1% Aluminum -2.2%, Nickel -6.1%).
z The EIA (below) shows the possibilities for WTI oil prices over the next 2 years.
Source: EIA Short-Term Energy Outlook, Jan. 12, 2021

z Getting the virus under control remains critical. Shutdowns destroy demand for commodities. For
global bears, copper and oil prices in particular, collapsed after the virus spread outside mainland
China.
z OPEC+ cut 12 mb/day. That may be “too little too late,” but it helped.
z For domestic energy bears, a fall in U.S. oil rigs looks catastrophic. Baker Hughes counted 351 rigs on
through Dec. 30th. That tally has increased in 11 of the past 12 weeks.
z 3 years charts show poor share prices by the likes of U.S. majors, XOM and CVX. A share price low
got put in March 23rd. We are far from it now.
z Brent crude futures and WTI did plunge to “single-digit lows” and even negative marks on April 20th,
as traders played the oil market price recovery contango.
Page 31
In early December, OPEC countries and Russia met (via webcam) for a multi-day meeting. They announced
an OPEC+ plan — to add 2 million barrels of oil a day back on the global market — which posed a supply risk
to this fragile oil price recovery.
On the other hand, maintaining deep production cuts would have limited the income collected by
OPEC+ members. Largely splitting the difference, OPEC agreed to increase output by +500K barrels a day in
January.
Down the road, Goldman Sachs, a respected authority on the global oil market, believes in this forward look:
The oil market is ripe for a comeback in 2021 – after a “winter speed bump” of renewed Covid-19 restrictions –
as demand for natural resources returns. However, other observers are less convinced.
Globe on February 1st—
The performance of the global manufacturing sector remained solid at the start of 2021. Although the J.P.
Morgan Global Manufacturing PMI fell to a three-month low of 53.5 in January, down from 53.8 in December,
it remained at one of its highest levels over the past three years.
Of the 30 nations for which January data were available, 23 registered PMI readings above 50.0 (signaling
expansions) compared to only six indicating contractions. Growth was led by Taiwan, the US, the Nether-
lands and India, while upturns in China and the euro area (on average) continued. PMIs for Japan, Spain,
Thailand, Malaysia, Kazakhstan and Myanmar all signaled contraction. The Greece PMI posted a reading
identical to the stagnation-mark of 50.0.
World manufacturing production and new orders both expanded again in January, extending the current se-
quence of concurrent growth to seven months. However, rates of increase eased for the second successive
month, as growth of new export orders slipped to near-stagnation.
Data broken down by sector signaled increases in output and new business across the consumer, intermedi-
ate and investment goods categories. Intermediate goods producers fared best, slightly outperforming their
investment goods counterparts in terms of both output and new order growth. The consumer goods sector
saw the weakest expansion in production as new business growth stalled.
Olya Borichevska, Global Economist at J.P.Morgan, said:
“The rate of global manufacturing expansion slowed at the start of 2021, according to the latest PMI surveys.
The output PMI fell nearly a point which was the largest drop since April. Smaller declines were seen across
other components. Encouragingly, the employment PMI moved higher last month.
“Companies remain cautiously optimistic about the year ahead, allowing for a further slight increase to be
implemented.”
Europe marked a +1.3% estimated GDP growth rate in 2019. The outlook is for -7.3% in 2020, +4.4% in
2021, and +4.0% in 2022.
Europe PMI on February 1st—

Growth of the Eurozone manufacturing economy remained resilient at the start of 2021, with the sector ex-
panding for a seventh successive month and again at a marked pace.
Page 32
After accounting for seasonal factors, the PMI recorded 54.8, down slightly on December’s 55.2 and little-
changed on the earlier flash reading. January’s figure was amongst the highest seen over the past two-and-
a-half years.
Growth was recorded across all three broad market groups during the latest survey period. However, the
improvement in operating conditions seen at consumer goods producers was marginal amid a drop in new
orders. In contrast, marked rates of expansion continued to be recorded in both the intermediate and invest-
ment goods sectors at the start of 2021.
Countries ranked by Manufacturing PMI: January
Netherlands 58.8 28-month high

Germany 57.1 4-month low
Italy 55.1 34-month high
Austria 54.2 26-month high
Ireland 51.8 3-month low
France 51.6 6-month high
Greece 50.0 4-month high
Spain 49.3 7-month low
The best manufacturing growth was again seen in those countries with strong export bases, the Netherlands
and Germany. In the Netherlands, expansion was the sharpest seen for over two years.
Italy also turned in its best performance for nearly three years, whilst there was also marked growth seen in
Austria.
Elsewhere, rates of expansion tended to be modest or, in the case of Greece, stagnant. Spain was the only
country to record a contraction, slipping to the bottom of the rankings, though this in part reflected the dis-
ruptive effects on production of Storm Filomena.
Overall, Eurozone manufacturing production increased for a seventh successive month, although the rate of
expansion was the weakest in the current sequence. Similar developments were seen for new orders.
Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit
said:
“Eurozone manufacturing output continued to expand at a solid pace at the start of 2021, though growth has
weakened to the lowest since the recovery began as new lockdown measures and supply shortages pose
further challenges to producers across the region.
“Supply chain delays worsened during the month to a degree only exceeded once – during the global lock-
downs early last year – in more than two decades of survey history.
“At the moment, manufacturing is providing an important support to the economy as the service sector is hit
by COVID-19 restrictions, but this support is waning. Consumer goods producers in particular are struggling.
While future prospects brightened, with manufacturers’ optimism striking a three-year high in January to
Page 33
sound a reassuring note of confidence at the start of the year, any potential delays to the
vaccine roll-outs will add an additional layer of uncertainty to the outlook.
“Supply shortages have meanwhile put pricing power in the hands of suppliers, pushing
raw material prices sharply higher. Increased shipping costs are adding to the burden.
These price pressures should ease once more supply capacity comes online, although
there remains some uncertainty about how much pent-up demand exists and how sticky
these higher prices may prove to be.”
Japan marked a +0.7% estimated real GDP growth in 2019. The consensus has -5.3%
growth for 2020, +2.4% for 2021 and +2.2% in 2022.
Japan on February 1st—
The latest PMI data pointed to a renewed deterioration in operating conditions across
the Japanese manufacturing sector in January.
Survey respondents registered a fall in output in the latest survey period, following a
broad stabilization seen in December, as rising coronavirus disease 2019 (COVID-19)
cases had a renewed impact on the economy. That said, Japanese manufacturers report-
ed a stable trend in new business inflows for the first time in over two years, as some
businesses anticipated a recovery in demand in 2021. As a result, firms in the Japanese
manufacturing sector remained optimistic of a rise in output over the coming year.
The headline au Jibun Bank Japan Manufacturing Purchasing Managers’ Index™ (PMI)
slipped from 50.0 in December to 49.8 in January, signaling a renewed contraction in the
sector. That said, the overall pace of contraction was only fractional, reflecting an im-
proving trend in new business.
The deterioration in the health of the sector was partly due to a renewed fall in output
volumes in January. After remaining broadly unchanged in December, output fell at a
marginal pace in the latest survey period. Production has not registered outright growth
since December 2018, a sequence of 25 months. Where production fell, firms often attrib-
uted this to rising COVID-19 infections and the implementation of new restrictions under
a new state of emergency.
Positively, Japanese manufacturers indicated a stable level of new orders for the first
time in over two years in January. The expansion ended a sequence of 24 consecutive
declines, as businesses reported demand was starting to recover amid the launch of
new products. That said, some firms noted that the COVID-19 pandemic had dampened
client confidence at the start of 2021. At the same time, goods producers recorded a
third consecutive decline in export demand, and one that was quicker than that seen in
December.
Commenting on the latest survey results, Usamah Bhatti, Economist at IHS Markit, said:
Page 34
“The Japanese manufacturing sector slipped back into contraction territory at the start of the year, as the
headline PMI fell slightly below the neutral 50.0 threshold in January as a rise in COVID-19 infections and
issuance of a state of emergency dampened operating conditions. Despite broad stabilization in December,
the decline in January meant that the sector has not registered growth since April 2019.
“Japanese manufacturers indicated a renewed fall in output levels in the latest survey period, after steadying
in December. Moreover, firms were further discouraged to replace voluntary leavers in the sector as staffing
levels reduced in January, reversing the fractional expansion in December.
“Nonetheless, the short-term prospects for the Japanese manufacturing sector appear to be turning a corner,
with firms reporting a stable level of new orders. Businesses were also optimistic that the pandemic would
subside over the coming year, triggering a wider economic recovery in Japan which would boost output lev-
els. IHS Markit estimates industrial production will grow 7.1% in 2021, although this is from a lower base and
does not fully recover the output lost in 2020.”
China marked a +6.1% estimated growth rate in 2019. Consensus has +2.1% in 2020, +8.3% in 2021, and
+5.4% in 2022.
From the China Caixin General Manufacturing PMI Comment on February 1st—
Business conditions faced by China manufacturers improved at the slowest rate for 7 months at the start of
2021, according to latest PMI data. 51.5 in Jan vs. 53.0 in Dec.
Commenting on the China General Manufacturing PMI data, Dr. Wang Zhe, Senior Economist at Caixin In-
sight Group said:
“The Caixin China General Manufacturing PMI came in at 51.5 in January, down from 53 the previous month.
The January reading was the lowest since June, despite marking the ninth consecutive month of expansion.
That indicates the post-epidemic recovery continued but saw a marginal slowdown. The PMI dropped 3.4
points in the past two months after reaching the highest level in a decade in November.
Page 35
1. Both supply and demand continued to expand, but at a much slower pace. The subindex
for output in January was the lowest in nine months, and the one for total new orders was
the lowest in seven months. Surveyed enterprises said that though market demand remained
strong, it was impacted by the resurgence of the domestic epidemic. The ongoing global
pandemic also significantly suppressed external demand. The gauge for new export orders
plunged into negative territory and reached the lowest level since June.
2. The slower growth in both supply and demand added pressure to the labor market. The
employment subindex fell further into contractionary territory, indicating manufacturing enter-
prises were still cautious about expanding hiring. The combined effects of declining employ-
ment and the slower expansion in demand added to manufacturers’ outstanding workload.
The gauge for backlogs of work was slightly above 50.
3. The gauges for input and output prices were both high, indicating added inflationary pres-
sure. Prices of raw materials, especially industrial metals, rose sharply, and the gauge for input
prices remained strong. As a result, factory gate prices continued to rise, New Export Orders
Index Sources: Caixin, IHS Markit Employment Index Sources: Caixin, IHS Markit with the
gauge for output prices hitting the highest point since June 2018.
4. Manufacturing enterprises slowed their purchasing, as market demand expanded slower

than expected. The measure for quantity of purchases significantly decreased from the previ-
ous month, despite remaining in positive territory. And the resurgence of the domestic epi-
demic also posed challenges to manufacturing enterprises’ supply chains. The measure for
suppliers’ delivery times fell further into negative territory, as logistic delays were widespread.
“Overall, the manufacturing sector continued to recover in January, but the momentum of both
supply and demand weakened, dragged by subdued overseas demand. The gauge for future
output expectations was the lowest since May last year though it remained in positive terri-
tory, showing manufacturing entrepreneurs were still worried about the sustainability of the
economic recovery.
“In addition, the weakening job market and the sharp increase in inflationary pressure should
not be ignored. This year, we should pay attention to the effectiveness of domestic epidemic
prevention amid the ongoing pandemic, and look at how to bring new momentum to the Chi-
nese economy as uncertainties over overseas demand continue.”
India consensus real GDP growth is at -8.0% for 2020 and +10.3% in 2021.
India Manufacturing PMI on February 1st —
The Indian manufacturing industry enjoyed a strong start to 2021. In response to faster expan-
sions in total sales and new export orders, companies scaled up production at the quickest
pace in three months. Firms were successful in their stock-building initiatives, with a sharper
upturn in quantity of purchases underpinning the strongest rise in input inventories in over a
decade. While employment fell further, job shedding moderated. Price pressures meanwhile
Page 36
intensified, driven by capacity constraints in supply chains.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) rose from 56.4 in
December to 57.7 in January, to signal the strongest improvement in the health of the sector in three months.
Sustained sales growth supported a further upturn in manufacturing sector output in January. The rise in
production was the sixth in successive months and the quickest since last October.
Firms noted a faster expansion in new business inflows at the start of the year, the quickest in three months.
Anecdotal evidence pointed to higher sales to new and existing clients, as well as the securing of bulk or-
ders.
New orders and output rose across each of the three broad areas of the manufacturing sector. For both
measures, rates of expansion picked up at consumer and capital goods firms but eased at intermediate
goods makers. Aggregate new export orders continued to increase in January, taking the current stretch of
growth to five months. Moreover, the pace of expansion was solid and quickened from December.
Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit,
said: “The Indian Manufacturing PMI remained well inside positive territory in January, signaling a sixth con-
secutive improvement in business conditions and moving further away from the COVID-related contractions
recorded around mid-2020.
“Factories continued to ramp-up production at an above trend pace, and the sustained upturn in new work
intakes suggests that there is room for capacity expansion in the near-term. Jobs fell at the start of the year,
but did so at the weakest pace in the current ten-month stretch of contraction.
“An important insight from the January survey was a pick-up in inflationary pressures, as lingering supply-
side squeeze drove the sharpest increase in purchasing costs for over two years. The favorable demand
environment was accommodative of price hikes and charges were raised at the fastest pace in over a year.
“Companies cheered the roll-out of COVID-19 vaccines and became more optimistic towards growth pros-
pects, a position that is supportive of investment and job creation as businesses attempt to rebuild their
inventories of finished goods and meet demand needs.”
S&P500 Earnings at a Glance

“Bottoms-up” consensus sees +23.6% EPS growth across 2021.
S&P500 EPS expectations across 2021 look ebullient. 2021 will usher in a ”snapback” from a -12.1% annual
earnings decline across 2020.
z Compare this scenario to flat +0.1% growth in 2019 and +20.0% EPS growth in 2018, driven by corpo-
rate tax cuts.
z In 2017, the index captured +11.0% EPS growth.
z In 2016, the index marked a weak +0.5% EPS growth: ‘earnings recession.”
Page 37
z 2015 delivered -0.6%. It was an ‘earnings recession’ year too.

z 2014 was at +5.1%.
Zack concurs on the “snapback” in Annual S&P500 EPS Growth in 2021. Still, negative sentiment about the
virus case load is anyone’s bear case. Consider it seriously.
What about consensus on Annual Revenue Growth? I see a negative -1.3% revenue growth rate for 2020 and
a +8.7% snapback in 2021.
These come after +3.7% revenue growth in 2019 and +8.7% revenue growth rates were recorded in 2018.
Basically, we return to the 2018 level in 2021, if consensus is right.
In terms of quarterly S&P500 data for 1H-2021? It is bullish, but already factored into stock prices. Q1-21
gets estimated at +19.6% and Q2-21 is at +48.7%
What of last year, 2020 in hindsight?

z The Q4-20 S&P500 EPS decline is at -2.3%
z Q3-20 was -6.3%
z Q2-20 was -31.6%
z Q1-20 was -14.9%
This steep 2020 decline followed a 2019 year of quarterly sideways performances.
z Q4-19 finished at +0.9%
z Q3-19 was -2.2%
z Q2-2019 was -0.4%
z Q1-2019 was -4.6%
Go three years back, to recall the 2018 bullish earnings growth rates.
z Q4-2018 finished at +13.3%
z Q3 was +25.9%
z Q2-2018 was +25.0%
z Q1-2018 was +24.6%
The S&P500 quarterly EPS growth for Q1-2021 looks for +19.6% earnings growth.
Consensus envisions the following 3 negative sector performances: Real Estate (-1.1%), Industrials (-16.7%),
and Energy (-35.5%). Realize, these are y/y comps.
The other 8 sectors outline the emerging positive turn-up story:

z Consumer Disc. (+92.1%) shows a stunningly strong Q1 EPS performance.
z Financials show a nice +64.9% quarterly Q1 growth rate. This is not ‘new’ news.
z Materials is at +34.3%. Also, mostly priced in now.
z Health Care is at +18.2%. A sleeper sector?
z Info Tech at (+18.0%) for Q1 looks excellent, and for an important sector.
z Comm. Services is at +8.7%.
z Utilities is at +0.6%.
z Consumer Staples is at +0.6%.
Page 38
Investors – Stay modestly optimistic on S&P500 stocks.
Valuations already incorporate the 2021 snapback and Fed relief. And
the new $908B stimulus package.
Any additional rise will come from a strong Biden administration

performance on COVID – when there is big upwards vaccine distri-
bution shift in hand.
Other Asset Class Summaries at a Glance

DJIA Similar to the S&P500, the Dow should record positive gains
across 2021.
Q1-21 estimates show us few sector negatives. Bears sell or short on

China activity struggles, higher U.S. virus counts, a flat Treasury yield
curve, and enduring global growth weakness.
NASDAQ Stay positive on Info Tech – on a 2021 and 2022 look ahead.
Follow strong Zacks Heat Map tech industries. Zacks #1 Rank IT
stocks remain worth buying.
z Entering the crisis, Info Tech profit margins were 21.6% in Q3-
19. They were 23.6% in Q4-20. The S&P500 sector average
was 11.4% in Q3-19. This profit margin was 10.5% in Q4-20. So,
Tech profit margins are double an average sector.
z Q1-21 Info Tech earnings are settling in at a +18.0% growth
rate.
z IT earnings can bounce back even faster than these marks
suggest. Remote working is tech-driven.
2021 should looks at least as good as the latest consensus show: I

see +16.3% annual Info Tech earnings growth and +9.8% revenue
growth.
2020 had +7.2% annual Info Tech EPS growth and +6.0% annual
revenue growth.
AAPL stock, as always, is a disproportionate weight inside the QQQs.

AAPL smoked up to $325 in February 2020. I note $134 a share
($536 in pre-split terms) on February 3rd.
The prior 4 to 1 share split AAPL stock price was $200 in early Sept
2019. In May 2019, it was $203. A year ago, it was $176 in March 2019.
The S&P500 and the QQQs can rise without AAPL. But share price
momentum from this big stock (and the other FAANG stocks) re-
mains critical.
Page 39
Russell 2000
Russell 2000 stocks lead – only when markets go full “Risk-on.” A 2021 small cap “risk-on” rally can continue
if both U.S. and global political risks fall, and global growth shows up in outlooks.
Always be mindful of illiquid small cap shorting. In ‘Risk-off” periods, shorts can cut down unprofitable small
caps -50%.
Fed Funds
On Jan. 27th, 2021, this led the FOMC press release—

“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States
and around the world.
“The pace of the recovery in economic activity and employment has moderated in recent months, with
weakness concentrated in the sectors most adversely affected by the pandemic. Weaker demand and earlier
declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain
accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S.
households and businesses.
“The path of the economy will depend significantly on the course of the virus, including progress on vaccina-
tions. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation,
and poses considerable risks to the economic outlook.”
No change is forecast into 2023. Confirm that in the latest FOMC projections.
December 16, 2020: FOMC Projection Materials, accessible version
The Fed has provided immense liquidity across bond markets, in government, mortgage, and corporate.
In closing, expect nearly all FOMC members to vote for uber-accommodative measures to the end of 2022,
at least.
Page 40
10-yr Treasury
The 10-yr at 1.5% was here not that long ago. It is a 1.12% this month, up from 1.05
basis points last month. The Fed is the primary repressor, with an assist from other
central banks.
Believe it or not, above 3.0% happened in the fall of 2018. A 10-yr rate from +2.5% to
+3.5% showed the range I used across 2017.
Seeing that benchmark rate climb towards 2.0% is in play only if the vaccine dis-
tribution meets the delivery expectations embedded in the bond market’s current
prices.
In 2022 – if the Fed changes course, based on much, much better macro data; long-
term rates could start to go up more than 2.0%. Don’t bet on it, until then.
Will rising inflation eventually become part of the landscape? A recent liquidity
spike has led many investors to wonder. Entering 2021, it is still a question without
an answer.
The 10-yr Treasury bond rate, applying a Fed Funds rate at 0.0%, is basically a loose
proxy for the core consumer price inflation rate now.
(Chart gratis Fidelity’s Global Strategist Jurrien Timmer on January 5th, 2021)
Corporate High Yield and Investment Grade Bonds
In our December 2020 poll, CIOs thought High Yield could be mixed. Some could
see expanding spreads. Others, the opposite. IG spreads should be stable.
IG corporates offer the solid coupons. Less attractive risk-free rates drive corporate
bond demand. Cash on balance sheets remains impressive. Investors should own
these bonds. A 3.5% to 4.5% coupon may be what is delivered.
Page 41
In light of Fed controlled credit spreads, I would be a careful buyer (long-term) on Investment Grade and
High Yield debt.
Municipal Bonds
Note: In our latest poll done on December 2020, CIOs were neutral on Munis.
State tax efficient munis always look excellent for older income investors. Having written that, all bond class-
es get pressured by rising rates, or a state budget crisis (is a tactical bottom close?). Plan to hold to maturity
(on 5-year paper?) as a precaution. U.S. rates can rise again. Yes. I know they are very low right now.
Federal recovery acts, down the road, should backstop most state and local entities.
WTI Oil
Consensus looks for $51 a WTI barrel by March 2022. Our oil price outlook is tied to OPEC+ agreements, U.S.
“fracker” rig counts, and any increase/decrease in global demand for gasoline-at-the-pump.
Gold
Gold traded at $1,838 an ounce on Feb. 2nd, 2021. I would be a seller at these Gold price levels. I had the
following long-time range call: For years, gold prices danced between $1200 to $1300 an ounce. Now, gold
price upside hails from big worries about rampant central bank money printing.
Gold price downside hails from a strong U.S. virus snapback, higher expected consumer price inflation, and
interest rates. These can be brought about by virtually any pickup in global GDP growth rates.
Even though Gold’s price tends to be influenced by numerous drivers, real risk-free yields are arguably con-
sidered as the most important. This is important in light of recent upside action in U.S. 10-yr Treasury yield.
The increasing use of bitcoin is the latest bear factor for gold.
The next chart shows you silver briefly traded at nearly $30 a troy ounce, busting its Bollinger Band. Silver
prices went up +55% over the last year. Gold prices stayed steady at $1,838.
Page 42
Coin shops sold out of silver over the last weekend of January 2021.
Silver Price Technicals
Source: ThinkTankCharts
NOTE: About Zacks Rank Sector & Industry Forecasts Coming Up Next --
Zacks Research System (ZRS) updates the Zacks Ranking System regularly; and groups
each company into three aggregates. Each of the ranking aggregates still apply the
standard proprietary Earnings Estimate Revisions system, but they help sort things out
within a top-down context.
Zack aggregates are:

- A 16 Sector grouping (versus the S&P500’s 10 sector groups),
- A 60 mezzanine grouping, known as “Middle” or Zacks M-Rank.
- And finally, a 250+ industry grouping, we refer to internally as the X- Rank.
The table in section 6, running four pages long, applied the consolidated ranking infor-
mation from the 60-industry, Zacks Middle, or M-Rank.
Industries titles listed along with the Zacks Middle Industries are S&P500 Industries,
with revisions and additions to reflect specific Zacks industries
Page 43
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4. ZRS Chart of the Month

Below: Sector Forward 12-Month Price to Earnings (P/E) valuations over 3 years.
This data effort was done on February 2, 2021.
A table (below) studies these S&P500 sector forward 12-month P/E ratios, as of Feb 2nd, 2021. I list 8 S&P500 sectors. This list
excludes Energy and Real Estate.
Sector Current P/E Mid 3-yr. P/E Difference (%)

Consumer Discret. 37.03 23.07 13.96
Industrials 23.55 16.52 7.03
Info Tech 27.8 20.49 7.31
Materials 19.92 15.63 4.29
Telcos 23.52 21.06 2.46
Consumer Staples 19.86 19.43 0.43
Health Care 18.54 18.05 0.49
Utilities 16.72 16.34 0.38
Bullish groups? Note huge S&P500 sector P/E differences in Consumer Discretionary (13.96), Industrials (7.03), Info Tech (7.3)
and Materials (4.3) sectors, in that order. Stocks inside the four sectors may be worth focusing on. Long-term. The sectors must
recover EPS to get their forward 12M S&P valuations down to reality, though.
Sideways trading groups? Groups where no buying clearly happened. Not much of a COVID earnings recovery play was picked
up. Relative to the 3-yr marks, low serial valuation declines are found in Health Care (0.38), maybe Utilities (0.49) sectors.
Page 44
5. Zacks Rank S&P500 Sector Picks

Zacks February Sector/Industry/Company Telescope
The Zacks Rank system showed 4 strong sectors, again, which is durably
bullish.
Info Tech was the top sectors this month; strong across most of its indus-
tries.
Two internationally exposed sectors – Materials and Industrials – also

came in at the top again. Think about Steel, Paper, Containers & Glass,
Metals-Non-Ferrous and Machinery-Electrical, Construction-Building
Services, and Metal Fabricating.
Financials the fourth great sector, with Investment Banking & Brokering,
Banks & Thrifts, and Major Banks coming in strong. Loan loss reserves
declined.
Health Care stayed at a Market Weight. Energy and Utilities were at the
back.
(1) Info Tech rose to Very, Very Attractive from Attractive. Computer-
Office Equipment, Misc. Tech, the Semis, Computer Software Services, all
of those look excellent.
(2) Materials stayed Very Attractive from Attractive. Steel, Paper, Chemi-
cals, Containers & Glass and Metals-non-Ferrous remained very strong.
(3) Industrials stayed Very Attractive. Machinery-Electrical, Construction-

Building Services, Metal Fabricating, Pollution Control, and Machinery
were the top industries.
(4) Financials stayed Very Attractive. Investment Banking, Banks &

Thrifts and the Major Banks looked good. Higher rateshelp all of these.
(5) Consumer Staples rose to Attractive from Market Weight. Food and
Cons. Products Misc. Staples are the best.
(6) Consumer Discretionary fell two notches to Market Weight from Very
Attractive. Apparel, and Autos/Tires/Trucks, and Consumer Electronics
were strong, and showed the Stay-at-Home buyer remains strong.
(7) Health Care stayed at Market Weight. Medical Care is the best, likely
a COVID effect.
(8) Communications Services stayed at Market Weight. Telco Equip-

ment was a very strong spot.
(9) Utilities stayed Unattractive.
(10) Energy stayed Unattractive.
Page 45
6. Zacks Rank February Industry Tables
Zacks Forecasts for S&P 500 Industries

(As of January 31, 2021)
Very Attractive Very
Industry Portfolio (2.00 to 2.64 Zacks Attractive Market Performer Unattractive Unattractive
Rating: Rank) (2.65 to 2.81) (2.81 to 2.99) (3.00-3.20) (3.21 or worse)
Consumer Staples Food Cons Prod- Tobacco (2.89) Food/Drug Retail
Food Distributors Misc. Staples Hypermarkets &
ATTRACTIVE Packaged Foods (2.80) Beverages Supercenters
(2.58) Soft Drinks, (3.10)
Brewers
Distillers &
Vintners
(2.90)
Agri-business
(2.92)
Consumer Apparel Consumer Home Furnishing- Media Leisure Service

Discretionary Footwear, Autos/Tires/ Appliance Movies & Casinos &
Apparel & Trucks (2.97) Entertainment Cable Gaming
MARKET WEIGHT Accessories, Auto Retail, & Satellite, Advertising Hotels
Apparel Retail Automotive (3.00) Leisure
(2.13) Manufacturer, Products
Tires & Rubber, Non-Food Retail/ Restaurants
Auto Parts & Wholesale (3.62)
Equipment Department Stores,
Distributors General Merch. Stores, Publishing
(2.73) Specialty Stores (3.73)
(3.08)
Other Cons Disc
(2.74)
Consumer
Electronics
(2.77)
Page 46

Energy Oil & Gas – Oil Exp & Prod Oil & Gas Drilling (3.08) Oil Misc. – (3.23)
Integrated (2.57) (2.84)
UNATTRACTIVE Oil & Gas Prod. Coal &
Energy - Alternate Pipeline (3.14) Consumable
Sources Fuels (3.36)
(2.94)
Financials Invest Banking & Insurance Investment Funds

Brokering Insurance (3.00)
VERY (2.01) Brokers
ATTRACTIVE Multi-Line Finance
Banks & Thrifts Insurance Specialized &
(2.13) Life & Health Consumer Finance
Insurance (3.06)
Banks-Major Property &
Regional Banks Casualty Real Estate (REITs),
Diversified Banks, Insurance (2.72) Real Est. Mgmt & Dev.
Other Diverse (3.09)
Financial Srvs.
(2.55)
Health Care Medical Care Medical Products

Health Care Life Science Tools &
MARKET WEIGHT Distributors, Services,
Health Care Health Care Equipment
Supplies, Health (3.03)
Care Facilities,
Managed Health Drugs
Care (2.95) Biotech,
Pharma
(3.12)
Page 47

Industrials Machinery Conglomerates Railroads & Business Products
Electrical (2.69) Trucking Commercial Printing
VERY Electrical Comp. & (2.88) Office Services. &
ATTRACTIVE Equip. Supplies (n/a)
(2.32) Airlines
Air Freight & Aerospace & Defense
Construction – Logistics (3.17)
Building Services (2.89)
(2.49) Industrial Products-
Business S’vices Services
Metal Fabricating HR & Employment (3.17)
(2.52) Services
Trade Comps &
Pollution Control Distributors
(2.61) (2.92)
Machinery (2.67)
Info Tech Computer-Office Computer

Equipment Software-
VERY Office Electronics, Services
ATTRACTIVE (1.34) Home
Entertainment
Misc. Tech Software,
Data Processing Application
& Outsourcing Software,
Services Systems
Consulting & Software,
Services (2.15) Internet
Software &
Electronic- Services (2.48)
Semiconductors
Semiconductors Telco
Semiconductor Equip (2.61)
Equipment
Electronic
Manufacturing
Electronics
Services Electronic
(2.47) Components
Equipment &
Instruments
Computer
Hardware,
Computer
Storage &
Peripherals
(2.72)
Page 48
Very Attractive
Industry (2.00 to 2.64 Zacks Attractive Market Performer Unattractive Very Unattractive
Portfolio Rating: Rank) (2.65 to 2.81) (2.82 to 2.99) (3.00-3.20) (3.21 or worse)
Materials Steel (1.68) Building Products/
Construction
Paper Materials (2.75)
VERY Paper Packaging
ATTRACTIVE Paper & Forest
Products, (2.08)
Chemicals
Fertilizers & Ag.
Chemicals
Industrial Gases
Specialty Chemicals
Diversified
Chemicals
(2.53)
Containers & Glass

(2.58)
Metals non-Ferrous
Diversified Metals &
Mining, Gold,
Aluminum,
(2.63)
Telecom Utility Telephone

Telco Equipment
Services (2.86) Telco Services
(2.61)
Wireless Telecom
MARKET Services Integrated
WEIGHT Telecom Services
(3.28)
Utilities Utilities Utilities –

Gas Dist. Water Supply
UNATTRACTIVE (2.85) (3.03)
Utilities
Electric Power
(3.08)
Page 49
7. February Sell-Side and Buy-Side—Consensus at a Glance

Sell-Side Consensus
I. In early February, the “bottoms-up” consensus is now up to 4,251 — 12 months out.
This is +12.2% above an S&P500 trading at 3,787.
Here is what the track record of estimated price targets at the start of a year compare to the actual results.
According to FactSet, the average overestimation is 9.3%.
At the S&P500 sector level, the Energy (+16.9%) sector is expected to see the largest price increase, as this
sector has the largest upside difference between the bottom-up target price and the closing price.
On the other hand, the Consumer Discretionary (+6.1%) sector is expected to see the smallest price increase,
as this sector has the smallest upside difference between the bottom-up target price and the closing price.
II. Jurien Timmer, Director of Global Macro at Fidelity, shared this (Dec. 21st):
“The markets seem to be betting on a pretty good outcome in 2021. The tape has broadened significantly in
recent weeks, with value and small caps and non-US equities catching up to growth stocks & gold.”
“My sense is that the gains since the March 23rd low appear justified and that there will likely be ongoing
reflation in 2021. It seems like the output gap will continue to close with, perhaps, a combination of fiscal and
vaccine reflation.”
III. Results of a Wall Street Sell-Side Survey Done on Dec. 8, 2020 by CNBC.
Page 50
A narrow majority of market strategists surveyed by CNBC predict that U.S. stocks will continue to rally into
2021, with the S&P 500 rising between +8% and +22% next year from their current levels.
12 of 20 market strategists from major U.S.-based financial institutions who were polled by CNBC Interna-
tional predicted the S&P would rise to between 4,000 and 4,500 next year. The index finished Monday’s Dec
7, 2020 session 3,691.96, just below its 2020 closing high.
“We believe that as we head into 2021, the broader story will continue to be the true “reopening” of the econ-
omy in the U.S. and globally, driven by the distribution of vaccines and increase in global economic activity.”
-- U.S.-based markets strategist
14 of the strategists characterized their view on stocks next year as “cautiously optimistic.”
3 said they were “very optimistic,” and three said they were “cautious.” The optimistic analysts cited hopes for
continued economic stimulus in the United States and the rollout of Covid-19 vaccines, which has already
begun in a handful of countries including the United Kingdom.
4 strategists predicted S&P would finish at between 3,500 and 4,000 next year, and another four expect the
index to decline to the 3,000 to 3,500 range.
CNBC offered the strategists anonymity in exchange for their views.
The email-based survey took place from Nov. 25 to Dec. 3.
IV. A few major sell-side comments published in Forbes, Jan. 2021

TOPLINE
Here’s how high the top Wall Street strategists expect the S&P500 to climb in 2021.
KEY FACTS
Page 51
(1) Goldman Sachs said it expects the S&P500 to end next year at about 4,300 points (indicating +17% up-
side), an admittedly “optimistic” forecast contingent on increased corporate earnings and a low-interest rate
environment that remains favorable for corporations.
Hardly anyone’s as bullish as Goldman though; (2) Morgan Stanley, (3) Wells Fargo and (4) LPL Financial
all have end-of-2021 targets for the S&P of 3,900, representing about 6% upside to current levels.
Wells Fargo and LPL are confident corporate earnings will surge close to 30% next year, helping to ground
some of the outsized valuations in growth stocks that have pushed the average S&P valuation to more than
30 times realized annual earnings–up from about 22 last year.
Morgan Stanley said significant outperformance among cyclical stocks–those in discretionary industries
such as airlines, restaurants and hotel chains–over the past six weeks is a sign the economic recovery is
well underway, adding that these stocks should “extend their newfound leadership” next year.
However, the firm also warned that a likely increase in inflation next year could reverse broad market gains,
especially in “expensive growth stocks” (think: stay-at-home stocks like Zoom, Peloton and Shopify); if that
happens, the S&P500 could plunge as much as 8% next year, Morgan Stanley noted.
(5) The Bank of America has issued a 3,800-point target for the S&P500 at the end of 2021.
“The best days usually follow the worst days for the market,” Bank of America equity strategists said in late
November, urging investors to avoid panic selling during expected volatility in the new year. “Since the
1930s, if an investor sat out the 10 best return days per decade, his or her returns would be just 19% com-
pared to the 16,485% returns since then.”
WHAT TO WATCH FOR
Goldman notes three downside risks to its stock-market forecast.
(1) Chief among those is a worse-than-expected vaccine rollout in the first half of the year. The firm es-
timates that 50% of the U.S. population will be vaccinated by April, but it also notes that “the first week of
distribution has proven the logistics of proper delivery are complex.”
(2) Additionally, ramped up federal spending for Covid relief measures and ongoing asset purchases by the
Federal Reserve “could lead to a spike in inflation and interest rates,” a trend that’s historically resulted in
market pullbacks (something Morgan Stanley emphasizes in its slightly more-bearish outlook).
(3) Lastly, the Georgia Senate runoffs on January 5th were a great source of uncertainty, and could have
rattled markets if Democrats pull two surprise victories. But Goldman said it expected the S&P500 to climb
regardless of what happens with elections. This proved to be accurate.
CRUCIAL QUOTE
“Skeptics might say that after a +64% rally in the S&P500 since the low on March 23rd, 2020 this market may
soon run out of gas. But historically, the second year of previous bull markets has been rewarding for inves-
tors,” says Jeff Buchbinder, an equity strategist for LPL Financial.
“We think this bull market is set up potentially for a better-than-average first two years based on the experi-
ence during the 2008-09 financial crisis and an expected strong earnings rebound,” he adds, saying fiscal
Page 52
and monetary stimulus combined with pent-up consumer demand during the pandemic
should help bolster a recovery once the economy fully opens back up.
KEY BACKGROUND
Momentum stocks, and namely those in technology, have dominated the pandemic’s bull
market since the steep market correction in March, but the tide has shifted in the weeks
since the U.S. election as the outlook brightens for value stocks.
Though growth in tech stocks has decelerated, historic breakthroughs on the vaccina-
tion front and a new fiscal stimulus deal have bolstered many hard-hit industries, such as
travel, financials and energy.
V. Summary Tables with Zacks Strategist Views
The Zacks view? We will start at 4,000 for yearend 2021. Expect an average to below
average annual return.
“Bottom-up” Fair Value at 5-yr Actual YE price of

S&P500 Operat- average forward 12M S&P500 and Zacks
Year ing Earnings PE of 17.6 S&P500 Targets
2019 $163.12 2,871 2,954
2020 $138.89 2,444 3,668
2021 (est) $172.05 3,028 4,000
2022 (est) $198.54 3,494 3,850 to 4,400
“Bottom-up” Zacks Call for Zacks Price Target for

S&P500 Operat- S&P500 Operating S&P500 proxied with a
Year ing Earnings Earnings 5-yr Avg. PE of 18
2019 $163.12 $163.12
2020 $138.89 $140.00
2021 (est) $172.05 $176.82 3,682
2022 (est) $198.54 $204.58 4,050
Background on the last 4 years--
(1) For the second straight year, the U.S. large-cap stock markets outperformed sell-side
forecasts.
For 2020, the Sell-side had a 3,500 S&P500 call from Oppenheimer. UBS was the low call
at 3,000. The mode call for 2020? About 3,400.
(2) Wall Street consensus foresaw a 2019 close at 2,975.
Page 53
The year of 2019 actually ended with a 3,230 print. Again, the final print beat all 22 sell-side analyst projec-
tions.
(3) For 2018, all eight sell-side Wall Street strategists I tracked had made calls for between +4.1% to +16.0%
S&P500 returns. (3 at 4%, 2 at 6 to 8%, 3 at 12 to 16%)
(4) For 2017, 17 sell-side strategists pegged YE 2017 annual returns as bullish, from +1% (S&P500 at 2,275) to
+11% (S&P500 at 2,500).
Two high-end strategists were +9% and +11%. Six were “Middle-of-the-Road” bulls at +4% to +7% annually.
(5) For 2016, 14 sell-side strategists pegged YE 2016 annual returns from -0.5% (S&P500 at 2050) to +12.9%
(S&P500 at 2,325).
Five bulls looked for +8 to +12.9% returns. Six moderate bull sell-side strategists looked for +4 to +7% returns.
Three sell-side strategists showed up as relative bears. They looked for -0.5% to +2% returns.
VI. Other Sell-Side Views
The “Equity Risk Premium” is an excess return the overall stock market provides above a risk-free fixed in-
come rate. This excess return compensates investors for taking on the relatively higher risk of equities.
Sell-side strategists measured the S&P 500 equity risk premium at 6.2% in early 2019. It was 6.0% in April
2020, but down to 4.6% in November 2020. +4.2% is the average in the recent past. In 2020, post-virus, with
rates at rock bottom, sell-side models still show the equity risk premium is a positive force for stocks.
But, perhaps, not as positive as you may think? For backward-looking references, the equity risk premium
was +6.2% in 2013 and 6.0% in 2014. It peaked at 7.4% in 2012.
If low long-term risk-free U.S. Treasury rates stay compressed, a larger arbitrage incentive is there is to buy
stocks.
A 1.12% 10-yr U.S. Treasury rate is here in February 2021.
For a reference to that?
z 1.5% was the mark in September 2019

z 2.1% was seen in June 2019
z 2.5% was in April 2019
z 2.7% was seen in March 2019
Page 54
Bottom-up S&P 500 Earnings

Consensus used to call for strong EPS growth in 2020 tied to stable trend +2.0% U.S. and global real GDP
growth levels across 2020.
2021 get estimated by December consensus at +4.0% GDP
z Now, post-virus, GDP growth in 2020 is forecast at -3.5%

z U.S. real GDP growth finished 2019 at +2.2%
z The U.S. finished with +3.0% GDP growth in 2018
z The U.S. saw +2.3% in 2017, +1.7% in 2016 and +2.6% GDP growth in 2015
Furthermore, “bottoms-up” consensus forecasts on EPS growth for individual companies in the S&P 500
index expect growth at -12.1% in 2020 and +23.6% in 2021.
S&P500 earnings growth was +0.1% in 2019; a lull after a strong +20.0% in 2018 and +11.0% in 2017. However,
this EPS number was +0.5% in 2016 and -0.6% in 2015.
The Zacks view difference?
With negative earnings growth and revenue growth in hand, traders look to 2H-2021 and 1H-2022 for a strong
EPS and revenue recovery.
Pre-virus, the global economy was cut down by trade wars. Novel corona virus shutdowns were the coup de
grace.
2019 delivered a tariffed-down earnings growth rate and faced tough y/y comps. U.S. risk markets achieved
outstanding nominal S&P500 earnings growth in 2018 — on corporate tax policy. That was an anomaly.
Zacks is in sync with consensus earnings for 2H-2021 and beyond. The U.S. will be witnessing a recovery.
There are surely revisions to that ahead. We stay vigilant and will update.
Top-down S&P 500 Earnings

Top-down strategists, who track macro forces and apply top-down judgment to forecast S&P 500 earnings,
also look for roughly -12% EPS growth in 2020, and +24% in 2021; after no growth in 2019, +20.0% growth
in 2018 and +11.0% in 2017.
The finalized 2019 S&P500 earnings growth rate (+0.1%) was in line with +0.5% EPS growth in 2016 and -1.1%
earnings growth in 2015.
A poor EPS number in 2020 is ‘OK’ when placed next to the all-but-forgotten earnings recession of 2016. The
big cyclical play is to buy in front of double-digit 2021 earnings.
Page 55
Small Cap, Mid Cap and Large Cap stocks
2021 should be strong for small cap.
The 2020 sell-side was looking for anywhere from +10% to -4% returns, with the mode at +6.0%. There was
no favorite style class. Post-vaccine distribution, these became outperformers. Pre-virus, this roughly mir-
rored the buy-side.
Over the next 12 months, December 2020 CIOs forecasted returns for small caps at a +0 to +5% annual re-
turn, with similar sentiment on mid-caps at +0% to -5.0% returns. Large caps deliver +0% to -5% returns too.
z Value index returns outperform Growth index returns for small and mid-caps
z Value returns underperform Growth index returns in the Large Cap style too
2019 saw a rebound on small and mid-cap stocks.
For perspective, the small caps were on a run in 2018. 2H-2017 was when small caps turned up. Specifically,
September 2017. This followed 2 years of risk-off pessimism. 2016 recorded a bounce for small caps, with
regional banks up big after the election.
Fed rate shifts, financial excess leading to recession, Trump unpredictability, and huge U.S. Treasury debt
sales, and U.S. Presidential election volatility used to mark points of worry for bears.
Now, it is all about the corona virus vaccine distribution narrative.
The Zacks view difference?
For 2021, we are in line with at least ~8% returns for the S&P500 in 2021. We can see a +18% for the small
cap growth indexes.
The Russell 2000 indexes and mid-caps likely outperform that low ball 8% number.
Last year, we called it right. From late March to early April 2020, we turned bullish on U.S. growth and value
stock indexes across the style spectrum. Tech stocks were where our favorite industry groups lay.
We would keep appropriate weight on value indexes in 2021, including Energy.
In addition, we will see any stiff 2021 selloff on smaller cap indexes as a time to pounce, but only on ETFs,
not individual risky stocks. There is value to shifting into small and mid-cap index tracking, not names.
Large caps outside the U.S. are also worthy in 2021. A strong rotation into them would be confirmed, as GDP
growth picks up outside the USA — relatively more.
China is the exception. It has recovered already.
But take profits on the small Asia region players. It is “Sell the News” there.
Page 56
Buy-Side Consensus
S&P 500 and Russell 2000
In December 2020, our CIOs thought that --
z The likeliest Large Cap return is 0 to +5 percent over the next 12 months
z The likeliest Mid Cap return is 0 to +5 percent over the next 12 months
z The likeliest Small Cap return is 0 to +5 percent over the next 12 months
Only 50% of CIOs were positive on 2021 year-end returns.
For reference, the August 2019 survey buy-side consensus came in at 48% positive.
Sentiment was 80% positive in October 2018 and 80% positive in May 2018.
Sentiment was 74% positive in October 2017, 88% in April 2017, and 85% in January 2017.
Sentiment marked poor numbers during a prior earnings recession. In 2016, 45% of CIOs were positive on
the S&P500 in October 2016 (before the last U.S. Presidential election)
Compare this to 63% positive in July 2016 and 77% positive in March 2016.
S&P 500 and Russell 2000: Value or Growth
December 2020 showed large-cap, mid-caps and small-cap Value indexes outperforming Growth indexes in
the coming year.
Similarly, the August 2020 survey results showed small cap and mid cap Value indexes should outperform
Growth indexes. Value also outperformed Growth for large cap indexes now too.
August 2019 showed a strong preference for Value over Growth for any style of index.
The April 2019 and January 2019 and October, May, and Feb 2018 surveys, and October, August and April 2017
surveys showed a buy-side preference for value over growth stocks in the large-, mid- and small-caps too.
Keep in mind. These are long-term investors, not momentum traders.
Fed Funds
In December 2020, our CIOs saw the Fed Funds at 0 to 50 bps in 12 months.
In August 2019, a majority of CIOs saw less than 250 bps on the Fed Funds rate in 12 months: with 9% at 50
to 100 bps, 9% at 100 to 150 bps, 27% at 150 to 200 bps, and 18% at 200 to 250 bps.
In April 2019, CIOs saw Fed rates out 12 months – as 250 to 300 basis points. In October 2018, it was a lower
200 to 250 bps.
Page 57
10-yr Treasury
In December 2020, CIOs had the 10-year Treasury at 0.5 to 1.0%.
In November 2019, CIOs had the 10-yr Treasury rate between 2.0% and 2.5%.
In October 2018, a mode of (50%) CIOs in our survey also thought the 10-year Treasury rate range should fall
between +3.0 to +3.5%.
Corporate High Yield and Investment Grade Bonds
In December 2020, CIO expect IG bond spreads to remain stable. They expect HY bond spreads to be mixed.
Some CIOs expect these HY spreads to expand, others the opposite.
In April and August 2019, CIOs expected IG bond credit spreads to stay the same. The CIOs expected HY
credit spreads to widen.
z Oct. 2018 had (87%) of CIOs expecting high yield (HY) spreads to expand.
z What of late 2017 CIOs? There was similar concern. HY spreads had come in too much. There needed
to be a pullback/correction, in their minds.
z For reference, the Nov. 2015 CIO survey showed a majority expected credit risk spreads (i.e. the risk
a bond issuer defaults) on HY Corporate bonds to blow up. An Energy HY blowout was seen in late
2015.
Municipal Bonds
In our December 2020 survey, our CIOs were neutral on returns for munis. This was slightly better than the
typical response over past quarters.
In August 2019, 44% of CIOs were bearish, and 33% were at Market Perform.
z In the October 2018 survey, (40%) gave this security a bearish nod. (46%) were neutral.
z In October, August, and April 2017 and in Jan and Oct. 2016 — munis got a neutral to bearish nod.
Asset bubbles and debts piling up via bigger U.S. deficits are the concerns.
WTI Oil and Commodities GSCI Index
In the December 2020 survey, CIOs had WTI oil at Market Perform.
In the August 2019 survey, WTI oil had 70% of CIOs at Market Perform. In the April 2019 survey, (30%) of CIOs
were Bullish on oil, and (40%) were at Market Perform. (30%) were Bearish. October 2018 was Market Per-
form” on Oil prices too.
z October, August, and April 2017 surveys were Market Perform on Oil. Further back, Jan. 2017 was Bull-
ish on Oil.
Page 58
z October and July 2016 survey had CIOs at Market Perform. March 2016 saw CIOs get Bullish on Oil.
z November 2015 CIOs had Oil negative.
In December 2020, CIOs are at Market Perform on Commodities. This has stayed consistent.
In August 2019, Commodities are 50% Market Perform and 30% Bullish. Commodities stayed Market Perform
in both April and January 2019.
Look back to March 2016 for when Commodities looked firmly bullish.
Gold
In December 2020, CIOs are neutral on gold.
In Nov. 2019, CIOs were bearish on Gold.
In August 2019, 50% of CIOs were at Market Perform on Gold. 30% are Bullish.
In April 2019, 40% of CIOs were Market Perform on Gold. 50% were Bullish. 10% were Bearish.
Page 59
How Can Zacks Investment
Management Help?
Retirement Planning
To achieve your financial goals for retirement, Personalized
we believe it is essential to create a clearly- Investment Counseling
defined strategy. Count on Zacks Investment When you’re a Zacks Investment Management
Management to help you develop a strategy that client, you can count on individual attention
reflects your individual needs, goals, and risk and prompt, responsive service. We’re here to
tolerance. Once you have your strategy, we’ll help answer your questions, work with you to identify
you stick to it—because, especially in volatile and reach your goals, and to make sure you’re
markets, what feels like “the right thing to do” may comfortable with the portfolio management you
actually be what you don’t want to do. receive. Investing is an emotional process, and we
will work with you to ensure disciplined investing,
both in bull and bear markets.
Portfolio Management Your Wealth Management Advisor is always
Since 1992, Zacks Investment Management has
available to meet your needs, including:
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» Helping you understand what’s going on in
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Our overall investing is managed by our
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» Addressing any day-to-day needs you may
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ranked by Morningstar.
Two ways to learn more and speak to one of our retirement professionals:
Call 1-800-701-9830 or click below to schedule an appointment
Schedule Your Advisor Consultation

DISCLAIMER
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment
Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent
Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research
is a provider of earnings data and other financial data to institutions and to individuals.
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or
tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this
publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution
of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No
recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not
be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.
All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not
reflect those of the firm as a whole.
Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and
assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and
other sources may be required to make informed investment decisions based on your individual investment objectives and suitability
specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the
appropriateness of investing in any security or investment strategy discussed in this presentation.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties.
Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no
third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons
make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless
otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management
considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein. It
is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns,
which will be reduced by fees and expenses.
The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly-owned blue chip companies trading
on the New York Stock Exchange (NYSE) and the NASDAQ. An investor cannot invest directly in an index. The volatility of the
benchmark may be materially different from the individual performance obtained by a specific investor.
The Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq
stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment
trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not
derivatives,preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an
index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An
investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance
obtained by a specific investor.
ZACKS INVESTMENT MANAGEMENT Page 60

The Nasdaq-100® is one of the world’s preeminent large-cap growth indexes. It includes 100 of the largest domestic and international
non-financial companies listed on the Nasdaq Stock Market based on market capitalization. An investor cannot directly invest in an
index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly bluechip stocks,
selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility
of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot
invest directly in an index.
The S&P GSCI is the first major investable commodity index. It is one of the most widely recognized benchmarks that is broad-based
and production weighted to represent the global commodity market beta. The index is designed to be investable by including the
most liquid commodity futures, and provides diversification with low correlations to other asset classes. An investor cannot directly
invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific
investor.”
The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived
from real-time, mid-quote prices of S&P 500® Index (SPXSM) call and put options. On a global basis, it is one of the most recognized
measures of volatility -- widely reported by financial media and closely followed by a variety of market participants as a daily market
indicator. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual
performance obtained by a specific investor.
The MSCI World Index, which is part of The Modern Index Strategy, is a broad global equity index that represents large and mid-
cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market
capitalization in each country and MSCI World Index does not offer exposure to emerging markets. An investor cannot directly invest
in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.
The MSCI ACWI Index, MSCI’s flagship global equity index, is designed to represent performance of the full opportunity set of large-
and mid-cap stocks across 23 developed and 27 emerging markets. As of November 2020, it covers more than 3,000 constituents
across 11 sectors and approximately 85% of the free float-adjusted market capitalization in each market. The index is built using MSCI’s
Global Investable Market Index (GIMI) methodology, which is designed to take into account variations reflecting conditions across
regions, marketcap sizes, sectors, style segments and combinations. An investor cannot directly invest in an index. The volatility of the
benchmark may be materially different from the individual performance obtained by a specific investor.
The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by
Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest
directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific
investor.
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Stock Market Outlook

Zacks February View On Equity Markets 2

Born from Research, Built for Performance

STOCK MARKET OUTLOOK

1. Zacks February View on Equity Markets

Sure. That’s a worthy insight.

Even if your stocks are not in the crosshairs.

I. Click the next two hotlinks

According to their own facts page,

II. This excerpt comes from that second hot link:

III. Let’s dig into this.

8 million is a typical number for these types of option contracts traded!

That computes to $152,777 for each FD.

IV. In light of this diligence, my closing points

Source: Market Rebellion

Source: S3 Partners, To Feb. 1st , 2021

3. Zacks Forecasts at a Glance

Fair Value at 5-yr Actual YE price of

Zacks Price Target for

These likely lead in 2021, post-vaccine.

Source: Charlie BiLello

What About the Outlook for Underlying U.S. Economy?

The Economic Outlook for 2021 to 2025

What of the COVID situation?

Consult the following set of charts.

~35% drop in cases

Source: Eran Segal, scientist at the Weizmann Institute

Q1-2021 is tracking S&P500 earnings growth at +19.6%.

z Weak EPS in 2020 due to COVID and

How did the markets price all of this?

Next are January 2021 YTD S&P 500 sector returns:

4 early winners were:

Focus on cyclical sectors.

However, the pandemic is not over. Far from it.

Along with that, 2021 annual earnings should snapback +22.1%.

I had the VIX at 22.75 on Dec. 31st , 2020.

Setting U.S. returns expectations for 2021

Source: Charlie BiLello

Keep a massive $7T in Fed liquidity front-and-center.

Then, the $908B CARES act follow-on.

What Produces 2021 Optimism?

In hindsight, look at the last 3 years:

z Q1-2021 shows EPS growth of +15.6% and revenue growth of +3.5%

What’s Alive for 2021 Pessimists?

Source: The Block

Is it time to buy U.S. stocks in early February?

z Bulls rosily envision 2021 U.S. and global EPS snapbacks

Caution will prevail for the physical retail shopper.

o The top 1% own 52.4% of corporate equities and mutual funds.

The Fed insists their policies absolutely do not add to inequality.

Obamacare enrollment supports more coronavirus victims.

A U.S. and global growth struggle can deepen and deepen.

What of U.S. GDP Growth?

z Q4-20 was up +4.0% (the first estimate)

Q4-19 was up +2.1%. Q3 was up +2.1%. Q2 was up +2.0%. Q1 was up +3.1%.

month revisions matched December’s fall.

z September revised up to a final +711K.

z Since November, we made no progress toward lower levels of unemployment