Insights

WuRevue Week Ending 4/23/2021

 

Top News:

04/19: Taking a respite from recent saber-rattling and heightened rhetoric, US and China sought common ground on climate change.  Separately, one central bank official of China acknowledged bitcoins as “investment alternatives,” representing a notable departure from its past stance.  Japan’s exports enjoyed stronger-than-expected growth in March, driven by demand recovery in Western Europe and Asia. 

 

04/20: Despite no obvious selling catalyst, US equities declined, as a pattern of consolidation of recent record gains took hold. Meanwhile, the GOP is reportedly coalescing around a $600B-$800B infrastructure deal, far short of the $2T envisioned by Biden.

 

04/21: The US administration reached its self-declared goal of 200MM vaccinations in its first 100 days.  In a war of words, congressional Democrats have roundly rejected GOP’s counteroffer on infrastructure spending.

 

04/22: Initial jobless claims declined to the lowest level since early March 2020, continuing a recent trend of relative improvement.  As further fodder for market bulls, a gauge of leading economic indicators portends further recovery momentum.  Meanwhile, existing home sales fell in March as tight inventory pushed median home prices to a historic high.  Such largely positive economic data notwithstanding, US stocks ostensibly succumbed to profit-taking pressure, after reports surfaced of the administration’s plan to raise capital gains tax on the wealthy.  Across the Atlantic, the ECB stood pat in its monetary policy, as expected by the market.

 

04/23: A survey of purchasing managers showed continued strength in the US economic recovery in April.  Eurozone economic activity also expanded in April, buoyed primarily by manufacturing, which has proved less susceptible to containment measures.  In Asia, India is battling worrisome levels of new Covid cases amid a disappointing vaccine drive.

 

 

Heard on the Street:

“We just hit a major milestone with 50% vaccinations in the United States, and that number is only going to get better in the United States and in Europe, which is a couple of months behind. So there’s really more room to run in this rally, but it’s probably going to come more from value and cyclical sectors than from the tech trade, which is more of last year’s.”

— Mike Labella, Franklin Templeton senior portfolio manager, as quoted by CNBC on 4/21/2021

 

“The cement of reality that is the earnings season is of no great help to a market trading on hope. Hope in the form of a cyclical recovery and a longer-term world where too many unicorns jostle for far too few slots.  This is the essence of a liquidity-fed rally and as the U.S. economy gains traction, the debate on tapering should restart anew and with it higher US Treasury yields hitting growth.”

— Sebastien Galy, senior macro strategist at Nordea, as quoted by Barron’s on 4/21/2021

 

 

Longer Game:

Recent moves by the US suggest multilateralism is back in vogue in Washington.  A sustained framework of international engagement, particularly with allies, will be needed as the US confronts China and Russia, two frenemies bound by a shared distrust of America’s dominance.

 

 

Bonus:

Americans are taking to the road once again, a sign of confidence in the ongoing recovery.  Indeed, according to the US Energy Information Administration, gasoline demand is back to over 90% of pre-pandemic level.