Weekly Market Summary

Andrew Silver
FOR THE WEEK OF APRIL 2, 2021

A holiday shortened final week of March ushered in the beginning of the second quarter and an end to a very nice first quarter for stocks, commodities, and teh USD.  However, the bond market wrapped up its worst quarterly return in over four decades – vaccines and stimulus matter.  Market drivers for the week included a decent economic calendar, details of a large infrastructure spending package, positive Covid vaccine news, and the Ever Given floating away. Both the DJIA and S&P 500 notched fresh record highs last week with the S&P piercing 4,000 for the first time. Interest rates again moved higher, particularly in the belly of the curve. Internal leadership came from the technology complex and consumer discretionary names while materials, energy, and healthcare lagged. Oil and the broad commodity patch were flat on the week while the USD appreciated marginally.

Market Anecdotes

  • With the S&P 500 closing at record highs, it is worth noting whether the rally has healthy market breadth and, in
    fact, the S&P 500’s cumulative A/D line also hit a record high.
  • Bespoke noted in the 33 years where we saw a 5%+ Q1 gain in the S&P 500, the Q2 following returned 1.92% with positive returns 59.4% of the time.
  • POTUS revealed details of a proposed $2.3t infrastructure bill which is expected to be far less consequential to GDP and inflation than CARES, CAA, and the ARA.
  • The NYT covered a Deutsche Bank estimate that as much as $170b of the latest stimulus payments may flow into
    the stock market.
  • BCA estimates U.S. households were sitting on $1.7t in excess savings at the end of February. A third stemming from stimulus payments and two thirds stemming from consumers just spending less during the pandemic.
  • Rising nominal yields have put the bond market on a rough start to the year while rising real yields pose a threat
    to stock valuations as evidenced by 5yr/5yr forward real yields.
  • Bespoke’s analysis of the five regional Fed manufacturing data reported unfilled orders, delivery times, work week, employment, supply chain disruptions, and overall composite at record highs. Forward outlook is in the 97th percentile but inventories actually fell in March.
  • A proverbial “pigs get fat and hogs get slaughtered” Wall Street story unfolded in the unregulated family office
    market last week with Archegos Capital Management folding its hand and substantial derivative book with several major banks.
  • CDC test results on MRNA and PFE/BNTX revealed some good news, confirming high levels of protection
    regarding symptoms but also protection against infection – very welcomed news on the CoVid-19 front.
  • Taiwan Semi announced a $100b spend over the next three years in response to the massive shortage across the
    industry.

Economic Release Highlights

  •  The March jobs report far exceeded consensus estimates (916k v 658k), leaving the unemployment rate at 6.0%.
  • The March ISM Manufacturing Index of 64.7 came in well above consensus calls for 61.5. Strong new orders,
    surging costs, and slow deliveries were again very clear.
  • March Global Manufacturing PMIs echoed readings in the U.S. with EZ (62.5), Taiwan (60.8), South Korea (55.3)
  • Consumer Confidence in March surged higher to 109.7, handily outpacing the consensus forecast of 96.0.
  • The January Case-Shiller Home Price Index came in toward the high end of estimates with increases of 1.2% M/M
    and 11.1% Y/Y.
  • February Pending Home Sales fell 10.6% in what was very likely a weather-related miss.

The Numbers

This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.  The content of this post is provided by Taiber Kosmala, a research group and institutional money management consultant in Chicago, IL.
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