Insights

WuRevue Week Ending 4/9/2021

 

Top News:

04/05: Two major indices raced to yet another record high in a belated reaction to last Friday’s positive March employment data and encouraging signs of recovery in the service sector in the US in March.  Meanwhile, political maneuvering over how to foot the bill for Biden’s ambitious infrastructure plan (here, here) has begun in earnest.

 

04/06: A datapoint seen by Secretary Yellen as useful in deciphering labor market conditions suggested continuing recovery, even if its pace remained debatable.  The IMF upgraded global economic growth forecasts to 6 percent and 4.4 percent for 2021 and 2022, respectively. 

 

04/07: Telegraphing the unlikelihood of tapering or ending monetary stimuli for quite some time, the latest Fed meeting minutes noted that “the ongoing public health crisis continued to weigh on economic activity, employment, and inflation and was posing considerable risks to the economic outlook.”  JP Morgan Chase CEO Jaime Dimon believes the current US economic upswing could run into 2023, but also cautioned about the “not-unreasonable possibility that an increase in inflation will not be just temporary.”

 

04/08: With the 10-year Treasury yield receding to 1.63%, investors rotated back into growth and tech names, reassured by Chairman Powell’s reiteration of the Fed’s commitment to its current loose stance.  Supportive of the continuing need of this policy, the latest weekly unemployment claims showed a disappointing uptick again.

 

04/09: The Producer Price Index surged more than anticipated in March, registering an annual increase of 3.1% in its core rate, which strips out more volatile components.  Investors and traders remained at odds as to whether such data will force the Fed to hike near-zero short-term interest rate sooner rather than later.

 

 

Heard on the Street:

“I think investors are starting to realize that there will be a short-term rise in inflation, but it’s not going to be sustained.  Still, if the yield curve turns more positive or the 10-year yield rises but it’s because of economic growth, that’s a good thing. That’s what we’ve been waiting for these past 10 years!”

— Diane Jaffee, senior portfolio manager at TCW, as quoted by MarketWatch on 4/07/2021

 

 “The central interpretation of the FOMC minutes is of a Federal Reserve that remains doggedly dovish.  Policy rates will remain low until there has been a material recovery on the labor market. Forecasting recovery is not enough; it needs to actually happen.”

— Padhraic Garvey, head of Americas research at ING, as quoted by BusinessInsider on 4/08/2021

 

 

Longer Game:

As the first major economy to introduce a digital currency in 2020, China has been solidifying its “first out of the gate” advantage, prompting one market strategist’s prediction that “a digital yuan platform will aid in establishing the renminbi as the region’s predominant trade and reserve currency.”

 

 

Bonus:

Real estate has consistently comprised most of an American household’s net worth, particularly for those in metro areas.  According to a recent Fed survey, this favorable disposition towards this asset class isn’t likely to change in the near-term.