Companies’ bottom lines are getting a boost from the reopening, but stocks don’t seem to care

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Companies are seeing the reopening boost the bottom line, but stocks don't seem to care

"We definitely have clarity into what the market wants, it wants higher earnings estimates," Alec Young from Tactical Alpha told me. "What we don't have clarity on is, how big does guidance have to be to drive stocks higher?"

A second, more troubling issue, is the concept of "peak everything." Peak economic growth. Peak earnings growth. Peak reopening optimism. In a note to clients today, David Kostin at Goldman Sachs acknowledged that "U.S. economic growth is peaking." While decelerating growth is usually associated with weaker, but still positive, equity returns, he notes that "equities often struggle just as growth peaks and begins to decelerate." Deceleration of economic growth typically signals an end to a rally in cyclicals and a rise in more defensive sectors .Not necessarily, Kostin says. Though U.S.

His advice: Buy a screen of global-facing cyclicals relative to domestic-facing cyclicals. Stocks on his list include Nvidia, Qualcomm, BorgWarner, Mosaic, DuPont, and Freeport-McMoRan, all of which obtain more than 60% of their revenues outside the United States.Sign up for

 

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