Insights

WuRevue Week Ending 4/30/2021

 

Top News:

04/26: Ahead of a week that was packed with earnings, the Fed meeting, release of key economic data, and Biden’s “American Families Plan,” investors proved cautiously optimistic, bidding up the S&P 500 to a record intraday high.  Durable goods orders rose in March in a welcomed reversal of trend from February.  Dr. Fauci appeared confident that the US should see a “turning around of the dynamics” in Covid infections in a few weeks.

 

04/27: Investors refrained from making major bets before the Fed’s meeting Wednesday. Indeed, indices finished largely unchanged, despite a sharp rise in one consumer confidence gauge in April.  Elsewhere, two major housing barometers (here, here) showed outsized increases in median home prices.

 

04/28: While acknowledging inflation has risen, the Fed downplayed its risks by keeping the Bank’s loose monetary policy and supportive language intact in its latest meeting.  In response, however, the market’s trading remained range-bound, consistent with its recent trend of consolidation.  Investors also focused on Biden’s $1.8T “American Families Plan,” set to be the focus of his first address to a joint session of Congress.

 

04/29: Owing to governmental support and the ongoing vaccine rollout, US GDP jumped at an annual rate of 6.4% in the first quarter, anchored by a 10.7% increase in consumer spending.  A separate report from the Labor Department showed first-time jobless claims marked another pandemic-era low.

 

04/30: Supported by massive government transfers, personal income and spending surpassed expectations and showed record gains in March.  Meanwhile, another consumer sentiment showed a record high since the pandemic’s onset.  Yet investors cheered little, concerned about the momentum’s sustainability, especially in an environment where market valuations already appear full.  Across the Atlantic, the Continent fell into a recession as the euro area’s GDP shrank for a second consecutive quarter by 0.4%.

 

 

Heard on the Street:

“While it is appropriate for the Fed to not comment on fiscal policy, it is entirely appropriate for monetary policy to take significant fiscal policy shifts into account in calibrating the stance of monetary policy, but the Fed is not doing this.  Monetary policy looks set to be too easy for too long.”

— John Ryding, chief economic advisor at Brean Capital, as quoted by CNBC on 4/27/2021

 

“Whilst I still think given where we are, given the ongoing support for markets from monetary policy, equities will probably stay up and may continue to drift higher, but I just think you need to exercise a degree of caution, be a little more selective about where you are putting your money.”

— David Marchant, CIO of Canada Life Asset Management told CNBC on 4/29/2021

 

 

Longer Game:

Space– the final frontier! That familiar StarTrek refrain is playing out as China, the EU, Russia and the US jostle (here, here) for primacy.  As a reflection of this heightened interest, “pure-play” ETFs have now been introduced to the investing public.

 

 

Bonus:

Anticipating no rate hike from the Fed until December 2022, a recent survey of market watchers also showed that 2/3 of respondents believe asset purchases are no longer needed in order to support either the markets or the economy.