October Was Not Haunted For the Markets
After a rough September, the markets had a nice rebound in October with the S&P, Nasdaq and Russell 3000 (Small Caps) all gaining back what was lost in September.
The Stock Market rebound was across the board. All sectors ended the month in the black. The leader was Consumer Discretionary, which jumped 12.1%. Tesla’s stock price jump was a major reason for the strong month. The sector was also helped out by homebuilders Lowe’s and Home Depot as well as apparel manufacturers Nike and Ralph Lauren.
Get Your Holiday Shopping Done Early
Supply Chain issues still remain a focal point in the news, in company earnings calls and in economic forecasts. The issue is that growth in US Retail Sales has significantly outpaced the rebound in US Retail Trade Inventories with sellers and manufacturers both struggling to keep pace with demand.
At the end of September, the US Retail Trade Inventory to Sales Ratio fell to 1.1, which is well below the 1.5 average we’ve seen since 1992. This means there is just 10% of additional inventory on hand for every sale, compared to the typical 50% cushion. So, it may make sense to get your Christmas shopping done early.
The Latest “Hot” IPO
Rivian Automotive, an electric vehicle truck maker, is expected to IPO next week. It had its fair share of hype, based on Amazon’s involvement as an investor and the potential for Rivian’s trucks to deliver Amazon packages. It’s also in the EV space, which seems to help with generating crazy valuations (see Tesla). It’s the IPO I’ve been asked about the most this year.
No doubt it has a lot of momentum, but a lot of that hype has already been priced into the stock as it IPOs. It’s expected to IPO at a price of $62/share, which would give the company a market cap of $60 billion. That’s about the same market cap that Ford has, and Rivian hasn’t actually delivered a truck yet. Ford sold 4.2 million last year.
Rivian raised money earlier this year at a $27 billion valuation. If it IPOs at $62 billion, that would be a significant amount of growth in just 10 months. It has a ton of potential, but also carries a lot of risk that could derail the company and it’s stock price. In a recent Agent of Wealth Podcast episode, John Williams and I discussed what to consider when investing in IPOs.