Welcome to my latest video presentation, explaining the key factors behind the stock market rally’s resilience. Underlying conditions suggest that the market’s momentum is likely to last into next year. For greater details, read my article below.

Anxieties are rising on Wall Street, amid supply chain bottlenecks and the resulting inflation. Hence recent volatility. However, when examined dispassionately, the latest employment, economic and earnings data paint an optimistic scenario, albeit with the usual nuances and caveats.

Stocks soared Thursday as third-quarter corporate earnings come in this week like gangbusters. The main U.S. stock market indices rose as follows: the Dow Jones Industrial Average +534.75 (+1.56%); the S&P 500 +74.46 (+1.71%); the tech-heavy NASDAQ +251.79 (+1.73%); and the small-cap Russell 2000 +32.21 (+1.44%).

In pre-market futures trading Friday, all four indices were poised to open sharply higher. Let’s examine the tailwinds that are keeping the stock market rally alive.

The Labor Department reported Thursday that jobless claims totaled 293,000 for the week ended October 9, below the consensus estimate for 318,000 (see chart).

That was the first time initial claims fell below 300,000 since the nadir of the pandemic in March 2020. Continuing claims for the week fell by 134,000 to 2.59 million.

Corporate earnings are a bright spot as well. For Q3 2021, the estimated year-over-year earnings growth rate for the S&P 500 is 27.5%. But that could turn out to be conservative.

Keep in mind, over the past five years, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 8.4% on average. That means the S&P 500 is probably on track to post earnings growth of more than 30% for the third straight quarter.

If 27.5% or higher comes in as the actual growth rate for the quarter, it will mark the third highest year-over-year earnings growth rate reported by the index since 2010 (see chart).

This week, the financial services sector kicked off Q3 earnings season, with major banks exceeding expectations. That bodes well for the economy in Q4 and into 2022, because banks are economic bellwethers. This week’s earnings results so far show that the banks are writing more consumer loans as the economy reopens.

In terms of positive Q3 guidance, the technology sector is in the vanguard. Tech firms have thrived during the pandemic and their prosperity should continue in the post-COVID world.

Rising interest rates had been denting tech shares, but those rates are falling again. The benchmark U.S. 10-year Treasury yield has retreated in recent days, which enhances the valve of future corporate earnings, especially for momentum stocks. Accordingly, momentum stocks (such as tech shares) are making a comeback.

Supply chain imbalances…

But rapid economic recovery has put strains on the supply chain. Scrutinizing Q3 earnings calls transcripts to date, research firm FactSet searched for certain terms related to negative factors that can hurt operating results. The results are shown below:

Supply chain disruptions and costs have been cited by the highest number companies in the S&P 500 index to date as a factor that either 1) had a negative impact on earnings or revenues in Q3, or 2) is expected to have a negative impact in future quarters.

Read This Story: Just How Bad Is The Supply Chain Mess?

After supply chain disruptions, labor shortages and costs, COVID costs and impacts, and transportation and freight costs have been discussed by the highest number of S&P 500 companies.

And yet, these challenges have not derailed optimistic global growth projections. According to the International Monetary Fund, the global economy is projected to grow at a year-over-year pace of 6% in 2021 and 4.9% in 2022 (see chart).

Inflation is rising but it’s expected to retreat to pre-pandemic levels in most countries in 2022, once supply chain disruptions are ironed out. The consensus of economists and policymakers is that the supply chain will get closer to normalcy early next year, especially as COVID infections plateau.

COVID infections in the U.S. are currently down more than 40% from August and vaccination rates continue to rise as mandates kick in.

Investors often get spooked by temporary setbacks. Even the best growth company will stumble due to demand shifts, product introduction delays, or higher expenses. But a stumble is often just an opportunity to buy at a bargain price before growth resumes.

As I’ve just explained, the growth story lives on. Looking for a standout growth opportunity, for Q4 and beyond? We’ve just pinpointed an investment play that’s on the cusp of explosive gains. For details, click here.

John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.