When the market is cheap relative to positive fundamental trends -- like it was for much of last year -- I will occasionally review the macro landscape for confirmation that those trends are indeed correct so that I have more conviction to buy stocks.

Once that review is confirmed, it's back to the business of picking stocks.

Conversely, when the market is expensive relative to largely-discounted fundamental trends -- like it was in January when I warned about Frothy with a Chance of Complacency -- then I will occasionally review the macro landscape for confirmation that those trends have achieved a significant degree of conviction already.

It's a very interesting time to perform this exercise as we enter the heart of an earnings season which should offer many surprises.

For instance, how many short-sellers were caught off-guard by Shopify's (SHOP Quick QuoteSHOP - Free Report) blow-out results and monster 12% rally Wednesday? And how many investors were caught flat-footed by Pinterest (PINS Quick QuotePINS - Free Report) management comments that economic re-openings could hurt some of their recently strong revenue streams?

Both companies have been uniquely positioned to benefit from "everything-at-home" trends in the pandemic economy.

And as a SHOP investor who has benefitted from its inroads into Amazon's (AMZN Quick QuoteAMZN - Free Report) wheelhouse, I got a little worried today when I saw an expert e-commerce analyst suggest that the monster can invade a new market with new technology at any time.

Ophir Gottlieb of Capital Markets Laboratories posted this on Twitter this morning after SHOP's report...

"Amazon has been locked out of social commerce and that thematic is on its way to $100B in five-years. It has lost to SHOP. I wouldn't be surprised if AMZN announces a product and then I wouldn't be surprised if $SHOP stock took a hit in a bit of whiplash."

Macro Goodness and Gravity

As always, earnings season presents stock-specific opportunities for investors the same way that corrections do for the whole market.

What I'm looking at right now is a market getting long in the tooth on lots of economic tailwinds, virtually zero headwinds, and no regard for risk.

This week I presented to my TAZR Trader members a trio of economic views from some of my favorite quants.

Today, I will present 2X that trio of macro data perspectives that all argue for a lot of "goodness" once again already discounted (i.e., "priced-in"), and thus making the market vulnerable to wider profit-taking.

Macro Data View #1: The 2021 Snapback Looks Better Than 2010

My first view is from Jurrien Timmer, head of global macro at Fidelity, who posted on Twitter last week a great set of data snapshots showing how the violence of 2008 and 2020 recessions resulted in equally violent bounces in economic activity.

He captioned the charts thus: The current earnings cycle looks similar to 2010, which was the year after the Global Financial Crisis earnings bottom in mid-2009.

This is a big net positive tailwind as it describes the similar "bounce-back" phenom in spending, investment and thus EPS growth that we saw after the GFC.

But it is also well-known among data-driven macro folks.

And that's my point today -- it's good, but well understood and quite on the way to being discounted after a 25% rally since the November election.

You have to see the chart, and I blow it up for you, courtesy of Timmer's Twitter, in the video that accompanies this article.

Macro Data View #2: Goldman Sees Blow-Out GDP Peaking in Q2

My second view is from Goldman's econ team. Writing last Thursday for Yahoo Finance with a copy of the GS chart, Brian Sozzi said...

U.S. economic growth for this year is "peaking," Goldman Sachs strategists led by Ben Snider warned in a new note on Thursday. Snider said Goldman's economists predict 10.5% GDP growth for the second quarter, the strongest quarterly growth rate since 1978. The projection is also near the high-end of most economists on Wall Street. From there, well, it's all downhill for GDP growth.

Now this shouldn't be much of a surprise to anyone who understands the snapback phenom that Jurrien Timmer just highlighted. From depressed base effects, the "comps" look great.

The question becomes "How much of this goodness already baked into stocks?" We'll analyze that next with a BofA view on EPS momentum.

Again, watch the video to see the Goldman GDP forecasts.

Macro Data View #3: BofA Raises EPS Growth, But Targets SPX 3800

My third view is from the Bank of America global economics team headed by Savita Subrimanian. I've been following her for many years and she commands a team of quants equal to Fidelity and BlackRock.

This research note from BofA was titled "Early Innings of Strong Capex Cycle."

And I thought their growth upgrade for the S&P 500 -- $185 EPS this year, $205 next year -- and view of "early innings of strong capex cycle" would have them lift their valuation targets too.

But they remain at SPX 3800, keeping things under 20X on a forward multiple.

That sort of tells you where other big institutions will be too.

Macro Data View #4: BofA Sees Long-Term Expansion Still In Play

While they hold valuations under tighter reins up here at SPX 4200 and Nasdaq 100 (NDX) at 14,000, they also remain bullish on the global expansion led by the US.

In my fourth graph, I show a loaded baked potato of a slide from the BofA econ team with their key theme being this: if history is any guide, there's a long road ahead for the expansionary cycle.

Plus, optimism abounds among large investors. In their most recent FMS (Fund Manager Survey) of global institutional asset managers, they cite: Net 90% of FMS participants expect a stronger economy in the next 12 months, with 64% expecting it to get "a lot stronger."

Yet I still ask, how much is discounted at these valuations?

Macro Data View #5: Growth Bonfire, Fed by the Fed

And maybe all this growth is very sustainable, even with rising inflation in everything from lumber to RVs -- especially since the invisible hand of the Federal Reserve has made very clear that they are not afraid of higher prices and will ride this economy as hot as it can get.

My fifth econ perspective comes from the excellent quant team at Renaissance Macro who put together a study of three variable in a time series since 2007 -- (a) percent of global central banks increasing rates, (b) the Fed Funds target rate, and (c) the "shadow" funds rate (where markets believe the Fed is going).

They also note in their comments that this is net negative for the dollar. And that's not a surprise as any astute investor should know by now that dollars have been the funding fuel for asset chasing.

In the video, I show their recent Twitter post of this chart. You should also follow this team on Twitter for consistently great research content they share.

For instance, they posted a long-term valuation perspective on Software that should be cautionary for most technology investors. While I remain very bullish on Square and NVIDIA (NVDA Quick QuoteNVDA - Free Report) , I am hoping they are right about near-term weakness so I can add to positions.

And if you don't understand how and why NVDA is also a premier Software enterprise, see my recent discussion here: NVDA Headed to $750

One vitally important element I forgot to mention in that video is the power of the developer community surrounding NVDA. Jensen Huang & Co. know that their Hardware+Software stacks are what attract and keep engineers outside the company engaged/compelled to keep building and creating platforms/tools for their own companies.

Macro Data View #6: If Airline Travel Bounces, What Can't Surge?

Finally, the BofA team also has a great view of the snapback in air travel on US econ reopening. In reality, while this bounce will seem dramatic coming from zero, we know that people aren't dying to travel internationally.

But I think what it shows is how eager people are to be out and about in restaurants, shopping, concerts, festivals and traveling domestically.

We all look forward to such spending activity. I just still wonder if the market hasn't run ahead of itself.

On Monday, I got a fresh strategy note from BlackRock titled "Why we remain pro risk," but with this caveat...

"We stick to our pro risk stance as the U.S. leads a powerful global economic restart and our new nominal theme plays out, however, risks remain on the tactical horizon."

To me, all this spells some caution about over-stretched valuations and some cash-building for better dip buys.

Why? Because markets always run to extremes of both sentiment and valuation.

The give-back is almost always where the opportunities exist.

I'm not calling for "Sell in May" as much as a pause in May that gives better shots for a summer rally.

Disclosure: I own shares of SHOP, NVDA, and SQ for the Zacks TAZR Trader portfolio.

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader portfolio.

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