SPVU

S&P 500 experienced a new Lévy flight event on 28 October 2020, sending the index down 3.5% for the day.Investors suddenly shifted their forward looking focus from 2020-Q4 toward the more distant future quarter of 2021-Q1.Overall, the index ended the final trading week of October 2020 some 5.6% lower than the previous week.

The "average" expected S&P 500 EPS growth for calendar 2020 and 2021 is still 4%.The S&P 500 earnings yield has jumped to 4.64% versus last week's 4.35%, or the highest earnings yield since early May '20.The pullback in the S&P 500 and the Nasdaq is in fact helping the S&P earnings yield work its way higher as forward earnings continue to improve.

Final Q2 '20 data shows that the final bottom-up estimate for Q2 '20 was $27.98. The estimate started the quarter at $23.16.The initial Q3 '20 "bottom-up estimate is $32.85. By the time we see Christmas Day, this estimate should be up near $35.The sectors with the sharpest improvement already heading into Q3 '20 earnings are Consumer Discretionary, Financials, and Materials.

S&P 500 earnings data (courtesy of IBES data by Refinitiv) continues to show positive sequential increases in weekly S&P 500 earnings estimates for various time frames.The correction being seen in the US equity market - at least so far anyway - isn't supported by a degradation in either the forward 4-quarter S&P 500 EPS estimate or the various time frames covered by the S&P 500's "forward earnings curve".Despite the sharp drop in the large-cap Tech stocks, the Tech sector estimates haven't changed that much.

There is considerable capital likely to be deployed into equities as investor pessimism eases into optimism.Other than the FAANG issues, there are many equity opportunities yet available.Buy stocks of well-managed companies with active insider buying.