There are now more than 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history - bigger than even the Baby Boomers. Yet despite their size, and according to our research, Millennials currently account for 25% of total U.S income - some $3.1 trillion in direct annual purchasing power. Millennials are already coveted by marketers, even though their annual average income is 40% below the spending levels of the generation ahead of them (Gen X) and 30% below the spending levels of Baby Boomers, who are slowing down. But as Millennials rise into their peak earning years, their earnings are expected to grow.

Stocks were largely flat on Wednesday morning following earnings reports from Alphabet and Amazon and new employment data. Payroll provider ADP said that U.S. private employers added 174,000 jobs in January, well above the Reuters consensus forecast of 49,000 and up from a loss of 78,000 in December. The Dow fell 0.2%, the S&P was flat, and the Nasdaq rose 0.1%. Crude oil traded near $56 per barrel, while gold rose $3 to $1836 per ounce.

A few weeks ago, we talked about the potential for a major U.S. Dollar Index (USD) bottom based on a number of technical factors. The greenback was close to major long-term chart support, the COT data (absolute and adjusted for open interest) was very favorable for the dollar, and the COT data for the euro (58% of the USD) was very unfavorable. Sentiment toward the dollar was also very poor while sentiment toward the euro was very bullish. Since then, the USD has bounced 2.3% -- so we have a start.

In 1849, Jean-Baptiste Alphonse Karr wrote, "The more things change, the more they stay the same." Now, over 170 years later, his prophetic statement aligns perfectly with stock-market sentiment.

NYSE margin debt has soared since the end of March along with the recovery in stocks. There has been a very consistent long-term pattern in margin debt and its strong ability to predict major market tops. Are we there yet?

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

We saw some strange trading days in late 2020, and the majority of them had to do with the massive rotation that was happening at the time. But maybe we should start calling days like Thursday, January 14 more the norm than wacky. As we said recently, 2021 is starting out as the polar opposite of 2020 -- at least as far as the markets are concerned.

Stocks rose on Tuesday morning as investors weighed earnings reports from Bank of America, Goldman Sachs, and Halliburton, and congressional testimony from Treasury Secretary nominee Janet Yellen. The former Fed president said that she would focus on boosting employment and wages, which have been battered by the pandemic, and that economic recovery also depended on the rapid and broad distribution of coronavirus vaccines. The Dow rose 0.3%, the S&P 0.5%, and the Nasdaq 0.7%. Crude oil traded near $53 per barrel, while gold rose $11 to $1840 per ounce.

The stock market moved lower last week, as a Thursday afternoon selloff sent stocks into the red. Large-cap tech stocks were worse off than blue chips as investors digested Biden's stimulus plans and cabinet picks. During Friday's session, the Dow Jones Industrial Average fell 177 points, or 0.57%. The S&P 500 was down 0.72%, and the Nasdaq Composite was down 0.87%. For the week, the DJIA decreased 284 points, or 0.91%, the S&P 500 decreased 1.48%, and the Nasdaq Composite fell 1.54%.

Stocks fell on Friday morning as investors weighed the details of President-elect Biden's $1.9 trillion stimulus plan, along with disappointing retail sales data and the first 4Q earnings reports from the major banks. The Biden plan announced on Thursday calls for $1400 checks to Americans below certain income levels, an extension of supplemental unemployment insurance through the end of September, aid to state and local governments, and funding for a national vaccination program. Mr. Biden also proposed an increase in the federal minimum wage to $15 per hour from the current $7.25. JPMorgan, Citigroup, and Wells Fargo all posted stronger-than-expected earnings, helped by reserve releases, though their shares fell in morning trading. The Commerce Department reported that U.S. retail sales fell 0.7% in December after a 1.4% drop in November. The consensus forecast had called for flat sales last month. The Dow fell 0.5%, the S&P 0.6%, and the Nasdaq 0.5%. Crude oil traded near $52 per barrel, while gold dropped $29 to $1823 per ounce.

The big banks are typically the first to report earnings, and those announcements are about to begin. The second- and third-quarter earnings seasons were historically bad, while coming in slightly better than abysmal expectations. We note that 3Q EPS represented sequential improvement compared to 2Q, which was the trough of the earnings recession. By our calculations, S&P 500 earnings declined 16% in 3Q after plummeting 36% in 2Q. Our model assumes further improvement for 4Q20, with a decline of 3%. Taking all this into account, our 2020 estimate for S&P 500 earnings from continuing operations is $135. We expect further improvement (and outright growth) in 2021 and our forecast for 2021 EPS from continuing operations is $168. Our estimates imply a high-teen percentage decline for 2020, followed by 25% EPS growth for 2021. Finally, our preliminary EPS forecast for 2022 is $191. Our 2022 estimate assumes 15% EPS growth.