May 22, 2021 Weekly Market Update. The major U.S. equity indices, though volatile at times, finished muted and mixed on the week: Nasdaq posted a gain +0.31% while the Dow Jones Industrial Average -0.51% and the S&P 500 Index -0.43% lost ground. The S&P 500 is now just about 3% from the all-time high and remains up about 10% for the year. Equities continue to process degrees of sector rotation from high-flyer growth names to cyclicals, financials and energy; financial stocks look particularly attractive going forward with inflation, economic recovery trends and the potential of rising rates (higher rate interest on new loans). May composite purchasing managers index (PMI) came in at a whopping 68.1, handily beating the 63.7 estimates while initial jobless claims declined for the third consecutive week.
May 15, 2021 Weekly Market Update. Rising inflationary signs led investors to tap the breaks with all U.S. equity markets losing ground on the week: The Nasdaq -2.34% led the major indices lower followed by the S&P 500 Index -1.39% and the Dow Jones Industrial Average -1.14%. The reality is that things are likely to get more expensive for the producer and consumer as the Producer Price Index spiked 6.2% for the 12-months ended in April, while the Consumer Price Index also rose (from 2.6% to 4.2% year-over-year, marking the largest increase since 2008). The inflation data trends are spooking the market with concerns that the economy may be heating up so much that the Fed will be forced to taper its support early, and rate hikes could be back on the table. However, business activity continues to be very much on a robust, rebound trajectory with even more new lenient CDC mask guidelines now taking hold.
May 8, 2021 Weekly Market Update. The major U.S. equity markets finished mixed for the week: The Dow Jones Industrial Average +2.67% gain led all the major indices followed by the S&P 500 Index +1.23%; meanwhile the Nasdaq lost ground with -1.51% loss. On the corporate earnings front, the second quarter marked the second-highest increase in the bottom-up EPS estimate during the first month of a quarter since FactSet began tracking this metric in 2002. While the U.S. equity markets should be celebrating the potential for another massive (and unprecedented) stimulus bill of $1.8 trillion, there are strings attached in the form of potential massive tax hikes for corporations, high-earners, and on portfolios. With regards to COVID-19, one-third of the adults are now fully vaccinated while 45% of the population has had at least one shot.
May 1, 2021 Weekly Market Update. The U.S. equity markets finished the week with mixed results led by the S&P 500 +0.02% followed by marginal declines by the Nasdaq (-0.39%) and the Dow Jones Industrial Average (-0.50%). FOMC kept its policy stance unchanged with rates near 0% and also maintained the $120 B in monthly QE buying. The Fed commented "the path of the economy will depend significantly on the course of the virus, including progress on vaccinations." While COVID-19 has resurged in Europe, with particularly horrible outbreak in India, the uptick in U.S. states appear to have a short fuse with J&J vaccine re-released and 43% of the population now having at least one shot. The backbone of the economy has been the consumer and this category is sanguine with almost 11% consumption growth and consumer sentiment sharply higher in April at 121.7. As to the state of the health of the U.S. companies, 86% of the S&P 500 companies have beaten EPS estimates to date for Q1, which is the highest EPS beat % since FactSet began tracking this metric in 2008. However, the market has been reluctant to bring strong rewards given forward-looking concerns over future potential corporate tax rates (and new onerous capital gain tax regimes).