Moore said analysts have been ratcheting up their earnings forecasts based on what companies said during earnings season. The expectation is that earnings growth this year could now be 19 percent. Sixty percent of S&P 500 companies provided guidance that exceeded expectations.
BlackRock monitors earnings revisions, which can be a key indicator for the market, and the percent of positive revisions is at a record pace. They are now running at a rate of two upgrades for every downgrade, or a ratio of 2. That ratio has averaged 0.8 based in the data which goes back to 1988, Moore said.
“What happened to the U.S. on the back of tax cuts and fiscal stimulus is something we’ve never observed,” she said. All regions are showing improvements in positive earnings revisions but nothing like the U.S. Europe also has solid earnings momentum but it lags the U.S., and higher revisions in Japan are “noisy.”
She added: “While we are really making this constructive call on the U.S., in the next three to six months we do recognize the pace of upgrades and the pace of earnings growth will likely slow. We will have to watch very closely…We are on a rocket ship at the moment.”
But Moore said the landing does not have to be messy. “It can take off with a bang. I don’t know if ends with a bang. Rockets can come down and land gracefully, if they’re well engineered,” she said.
Risks to the bull market are higher inflation and rising real rates, and for now the strategists said they see modestly higher inflation and gradually rising rates.
“This is a very different cycle, at a time when fundamentals are already solid,” said Moore. “We will have to be very vigilant and try to stay focused not just on what happens to earnings but as to what happens with inflation pressures, and the impact that could have on margins. The big risk is inflationary pressure eroding margins.”
Moore said her favorite sectors are technology and financials. Technology should gain from increased spending by corporations, benefiting from tax law changes. She said the other boosts to the market from tax law changes should be more corporate buybacks and acquisitions.
Panic selling often happens during stock market dips, and those who dump investments may later regret their decision.
The bigger issue, however, is getting back into the market after a “freak out,” according to research from the Massachusetts Institute of Technology.
“Panic selling is predictable,” said co-author Chi Heem Wong, researcher at MIT, and there are trends among those who dump assets during volatile periods.
Men who are over age 45, married with children and say they have “excellent investment experience or knowledge” are more likely to panic sell during stock market dips, research shows.
“It’s pretty consistent over time that people with certain attributes tend to panic sell more often than others,” Wong said.
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While the research didn’t examine why certain investors are more prone to impulsive sell-offs, they found another alarming trend: Many panic sellers don’t reinvest after going to cash.
More than 30% of investors who panic-sold assets after previous downturns never got back into the stock market, as of Dec. 31, 2015, the paper found.
It’s a problem because those who leave the stock market and don’t re-enter miss out on the recovery. In fact, the best returns may follow some of the biggest dips, according to research from Bank of America.
Since 1930, missing the S&P 500‘s 10 best-performing days every decade led to a total return of 28%. However, someone who stayed invested through the ups and downs may have a 17,715% return, the company found.
“The worst thing that you can do is let the mistake of selling at the wrong time hold you back from participating in some of the gains in the future,” said certified financial planner Jake Northrup, founder of Experience Your Wealth in Bristol, Rhode Island.
Why the panic sale happened
Before crafting a plan to re-enter the stock market, experts say it’s essential to explore the reasons why the panic sale may have happened.
First, panic sellers may want to reflect on the event, their thought process, feelings and what they can learn from it, said Northrup.
“Diving a little bit deeper, was it the volatility that really impacted you?” he asked. “If so, maybe take a harder look at your risk tolerance.”
For example, if someone can’t stomach market swings, they may want to reconsider their asset allocation, perhaps pivoting to less stock exposure, depending on their situation, he said.
But they need to ask themselves if there’s been a change in their core values, goals and reasons for investing. If the answer is no, they may not need to shift their investing strategy, Northrup said.
Someone who panic sells may also have a near-term need, which may have amplified their fear, said Teresa Bailey, CFP and wealth strategist at Waddell & Associates in Nashville, Tennessee.
How to re-enter the stock market
While getting back into the market may pay off long-term, experts say panic sellers often feel anxious about when to reinvest.
“You have to be right twice,” said Bailey, as it’s difficult to know when to sell and re-enter the market.
“Typically, emotion is amplified around getting back in because you don’t want to make a second mistake,” she said.
Typically, emotion is amplified around getting back in because you don’t want to make a second mistake.
Wealth strategist at Waddell & Associates
Some panic sellers wait for assets to decline again before re-entering, which may only extend their time out of the market, Bailey said. However, if they cashed out based on a short-term news event, it’s important to jump back in.
The most common strategy is dollar-cost averaging, where someone puts their money back to work by investing at set intervals over time.
While research shows investing a lump sum sooner may offer higher returns, dollar-cost averaging may help prevent emotional re-investment decisions.
“If someone has panic sold, they might have a tendency to be very emotional with investing,” Northrup said.
“It can be really challenging if someone is scarred from some of the volatility and then missing out on some of the gains that they could have had,” he said.
Trying a combination approach
iNueng | iStock | Getty Images
Investors may also combine dollar-cost averaging with a lump-sum approach, Bailey said, which may need professional guidance.
For example, they may reinvest every week for eight to 10 weeks, and deploy a larger amount if the market dips during that period, she said.
The tactic may allow someone to speed up their timeline to reinvest and get back in at a lower point.
But regardless of the strategy, it’s important to try and learn from previous mistakes and stick with the long-term investing plan.
“Over time, data shows if you stay invested your pot of money will grow,” Bailey said.
Electric vehicle maker Tesla rolled out a long-awaited software update Friday night that allows customers to request access to its controversial Full Self-Driving Beta (FSD Beta) software.
The move delighted fans of CEO Elon Musk and Tesla, but it risks drawing the ire of federal vehicle safety authorities who are already investigating the automaker for possible safety defects in its driver-assistance systems.
FSD Beta is an unfinished version of Tesla’s premium driver-assistance software, FSD, which the company sells in the U.S. for $10,000 upfront, or $199 a month.
FSD is marketed with the promise of enabling a Tesla to automatically change lanes, navigate on the highway, move into a parking spot, or roll out from a parking spot to drive a small distance at a slow pace without anyone behind the wheel.
FSD Beta gives drivers access to an “autosteer on city streets” feature, which has yet to be perfected and enables drivers to automatically navigate around urban environments alongside other vehicles, pedestrians, bicyclists and pets without moving the steering wheel with their own hands. Drivers are supposed to remain attentive, however, with both hands on the wheel and prepared to take over driving at any time.
None of Tesla’s driver assistance systems — including the company’s standard Autopilot package, premium Full Self-Driving option, or FSD Beta — make Teslas autonomous.
The company previously made FSD Beta available to about 2,000 people, a mix of mostly employees and some customers, who test it out on public roads even though the software hasn’t been debugged.
The new download button could ostensibly lead to a rapid expansion in the number of participants who are not trained regulatory officials.
Tesla CEO Elon Musk gestures as he visits the construction site of Tesla’s Gigafactory in Gruenheide near Berlin, Germany, August 13, 2021.
Patrick Pleul | Reuters
Last week, when CEO Musk announced new details about the FSD beta button, Jennifer Homendy, the head of the National Transporation Safety Board, voiced concern over the company’s plans in an interview with The Wall Street Journal.
Homendy said, “Basic safety issues have to be addressed,” before Tesla expands FSD Beta to other city streets and regions. The NTSB chief was also displeased that the company was conducting testing of the unfinished product with untrained drivers on public roads in lieu of safety professionals.
Homendy also remarked — and in interviews with Autonocast, an industry podcast, and the Washington Post — that Tesla’s use of the term Full Self-Driving for a “level 2” driver assistance system is misleading and confusing.
Musk himself said last week in a tweet that FSD Beta now seems so good it can give drivers the wrong idea that they don’t need to pay attention to driving while FSD Beta is engaged, even though they are supposed to remain attentive and at the wheel at all times.
On Saturday, after Tesla enabled the “request full self-driving beta” feature in its vehicles — a fan blog named Teslarati shared a post on Twitter asking, “Does Tesla have a fair chance after NTSB Chief comments?”
Musk replied to them on Twitter with a link to the Wikipedia biography of Homendy. While Musk has previously urged his tens of millions of followers on Twitter to alter a description of his own career on Wikipedia, he shared this link to Homendy’s bio there without comment.
CNBC reached out to Tesla and the NTSB — neither was immediately available to comment on Saturday.
Musk has been promising Tesla owners an FSD beta download button for months. In March 2021, he wrote in a tweet that the forthcoming button would give users access to the latest FSD Beta build as soon as their car connected to Wi-Fi.
He changed that approach, however. Now, Tesla has a calculator it uses to give drivers a “safety score,” and determine who will be allowed to get and use FSD Beta software.
Screen-shots shared with CNBC by Tesla owners with FSD indicate that the company’s “safety score” is akin to an insurance risk factor score.
Tesla’s systems tabulate a drivers’: “Predicted Collision Frequency, Forward Collision Warning per 1,000 Miles, Hard Braking, Aggressive Turning, Unsafe Following Time, and Forced Autopilot Disengagements,” according to correspondence and screenshots viewed by CNBC.
Tesla’s system does not, at this time, appear to measure and account for how often drivers fail to keep their hands on the wheel, how quickly they take over driving when prompted, or how consistently they keep their eyes on the road.
Only users who have a great driving record for a full week, in Tesla’s view, may gain access to FSD Beta.
Before Tesla released its FSD Beta button (and the 10.1 version of FSD Beta, which is expected this weekend, too) CNBC asked the California DMV Autonomous Vehicles Branch how pervasive and safe FSD Beta-equipped vehicles have been in use in the state so far.
The DMV declined an interview request but said, in an e-mailed statement:
“Based on information the information Tesla has provided the DMV, the feature does not make the vehicle an autonomous vehicle per California regulations. The DMV continues to gather information from Tesla on its beta release – including any expansion of the program and features. If the capabilities of the feature change such that it meets the definition of an autonomous vehicle per California’s law and regulations, Tesla will need to operate under the appropriate regulatory authorization. Regardless of the level of vehicle autonomy, the DMV has reminded Tesla that clear and effective communication to the driver about the technology’s capabilities, limitations and intended use is necessary. The DMV is reviewing the company’s use of the term ‘Full Self-Driving’ for its technology. Because it is ongoing, the DMV cannot discuss the review until it is complete.”
Bitcoin was down as much as 6% and ether sunk as much as 10%, amid a wider sell-off early Friday, as investors digested the news.
“Since the announcement less than two hours ago, I have already received over a dozen messages – email, phone and encrypted app – from Chinese crypto holders looking for solutions on how to access and protect their crypto holdings in foreign exchanges and cold wallets,” David Lesperance, a Toronto-based attorney who specializes in relocating wealthy crypto holders to other countries to save on taxes, told CNBC early Friday.
Lesperance said the move is an attempt to freeze crypto assets so that holders can’t legally do anything with them. “Along with not being able to do anything with an extremely volatile asset, my suspicion is that like with Roosevelt and gold, the Chinese government will ‘offer’ them in the future to convert it to e-yuan at a fixed market price,” he said of President Franklin Roosevelt’s policy around the private ownership of gold, which was later repealed.
“I have been predicting this for a while as part of the Chinese government’s moves to close out all potential competition to the incoming digital yuan,” said Lesperance.
The People’s Bank of China said on its website Friday that all cryptocurrency-related transactions in China are illegal, including services provided by offshore exchanges. Services offering trades, order matching, token issuance and derivatives for virtual currencies are all strictly prohibited, according to the PBOC.
The directive will take aim at over-the-counter platforms like OKEx, which allows users in China to exchange fiat currencies for crypto tokens. An OKEx spokesperson told CNBC the company is looking into the news and will let CNBC know once it has decided on the next steps.
Lesperance claims some of his clients are also worried about their safety.
“They are concerned about themselves personally, as they suspect that the Chinese government is well aware of their prior crypto activities, and they do not want to become the next Jack Ma, like ‘common prosperity’ target,” said Lesperance, who has helped clients to expatriate in order to avoid taxes, amid a rising crypto crackdown in the U.S.
“Today’s notice isn’t exactly new, and it isn’t a change in policy,” said Boaz Sobrado, a London-based fintech data analyst.
But this time, the crypto announcement involves 10 agencies, including key departments such as the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security, in a show of greater unity among the country’s top brass. The State Administration of Foreign Exchange also participated, which could be a sign that enforcement in this space might increase.
Signs of coordination
There are other signs of early government coordination in China. The PBOC document was first announced Sept. 15, and a document banning all crypto mining by China’s National Development and Reform Commission was released Sept. 3. Both were published on official government platforms on Friday, suggesting a collaboration between all participating agencies.
And unlike past government statements that refer to cryptos under the same umbrella language, this document specifically calls out bitcoin, ethereum and tether, as stablecoins begin to enter the lexicon of regulators in China.
Bespoke Growth Partners CEO Mark Peikin thinks that this is the start of widespread, near-term pressure on the price of bitcoin and other cryptocurrencies and that “the risks facing Chinese investors will have a significant spillover effect, leading to an immediate risk-off trade in the U.S. crypto market.”
“Chinese investors, many of whom continued to turn a cold shoulder to the Chinese government’s latest and largest crackdown on cryptocurrency trading the last several months, may no longer remain bellicose,” Peikin told CNBC.
“Chinese investors thus far largely skirted the ban by decoupling transactions – using domestic OTC platforms or increasingly of late, offshore outlets, to reach agreement on trade price, and then using banks or fintech platforms to transfer yuan in settlement,” Peikin said.
But given the PBOC has improved its capabilities to monitor crypto transactions – and the recent order that fintech companies, including the Ant Group, not provide crypto-related services – Peikin said this workaround used by Chinese investors will become a progressively narrow tunnel.
Friday’s statement from the PBOC adds to other news out of China this week, which has roiled crypto markets. A liquidity crisis at property developer Evergrande raised concerns over a growing property bubble in China. That fear rippled across the global economy, sending the price of many cryptocurrencies into the red.
However, not all are convinced this downward pressure on the crypto market will last.
Sobrado thinks the market is overreacting to Friday’s announcement from the PBOC, given that a lot of the exchange volume in China is decentralized and conducted peer-to-peer – increasingly the most telling metric of crypto adoption. While exchanging tokens P2P doesn’t evade regulatory scrutiny, Sobrado said those crypto exchanges are harder to track down.
Lesperance also points out that Friday’s news might actually strengthen the business case for cryptos as an asset class, given they are a hedge against sovereign risk.
Ultimately, the biggest question is whether this latest directive from Beijing has teeth. “The running joke in crypto is that China has banned crypto hundreds of times,” Sobrado said. “I’d be willing to wager people will be trading bitcoin in China a year from now.”