Insights

WuRevue Week Ending 3/12/2021

 

Top News:

03/08: Even as the Administration’s $1.9T fiscal recovery bill became one step closer to passage, investors remained leery of upticks in Treasury yields.  Brent crude topped $70/barrel, after an Iran-backed militia attacked Saudi oil facilities.  Indicative of the ongoing global economic recovery, China’s latest export data rebounded sharply.

 

03/09: A retreat in long-term interest rates fueled a recovery in the tech-laden NASDAQ, which rebounded sharply from its recent correction.  Optimism among US small businesses improved only marginally in February, further illustrating the recovery’s unevenness.

 

03/10: Congress’ passage of the unprecedented stimulus legislation spurred reopening trades in stocks, pushing the economically sensitive Dow to a record close.  Assuaging inflationary concerns, February’s CPI saw a 1.7% annual increase while the core rate, which excludes more volatile food/energy costs, edged lower to 1.3%.  The Administration increased the purchase of vaccines to allow for “maximum flexibility” in meeting future needs.

 

03/11: Biden signed the $1.9T stimulus bill one day earlier than expected, helping to propel the Dow and S&P 500 to new heights.  Weekly filings for jobless aid have slowed to a four-month low but remain exasperatingly above pre-pandemic level.  Yields on European debt dropped, after the ECB said it will inject liquidity at a “significantly higher pace” to prevent a “tightening of financing conditions.”

 

03/12: US producer prices registered an annual increase of 2.8% in February, which spurred the 10-year Treasury yield to rise above 1.6% again.  One gauge of consumer sentiment rose in early March to the highest point in a year, due to increased vaccinations and widely anticipated passage of additional stimulus.

 

 

Heard on the Street:

“Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now.”

— David Tepper, founder of Appaloosa Management, as quoted by CNBC on 03/08/2021

 

“We believe the recent equity volatility is likely to continue as investors seek to balance increasing optimism over growth with worries about higher inflation.  But while we expect conditions to remain volatile, the most recent developments on three of the main market drivers — stimulus, pandemic news, and inflation data — point to further equity upside.”

— Mark Haefele, CIO at UBS Global Wealth Management, as quoted by MarketWatch on 03/12/2021

 

 

Longer Game:

Should inflation be a concern?  Between the fiscal recovery aid passed by Congress and the expansion of the Federal Reserve’s balance sheet since the pandemic’s onset, the US has pumped approximately $10T into the system, about half of the country’s annual GDP.  While inflation may not be a near-term concern due to the slack in employment and wage growth, it is certainly a cloud worth watching in the medium-term, as debate continues over how such unprecedented liquidity should be assessed (here, here). 

 

 

Bonus Item:

A double dose of good news– Vaccine rollout continued to accelerate in the US, where approximately 25% of the population over 18 years of age have received at least one jab.  Additionally, a potential fourth US vaccine, currently under late-stage trial, reported encouraging data.