Conway’s QuickTake: Week of April 19, 2021
Here’s What Happened Last Week:
Major benchmarks had their fourth consecutive week of gains, pushing levels to record highs. A fall in treasury yields helped support rate sensitive sectors. Within the S&P 500 Index, utilities and the smaller-sized real estate sector were amongst the best performers. The materials and health care sectors also demonstrated relative strength. The energy sector was nearly flat after falling late in the week. The communication services sector also lagged due to weaker performance from several large constituents. Growth stocks edged out against value stocks while large- and mid-caps bested small-caps. That said, value and small-cap stocks remain ahead of growth and large-cap stocks, respectively, so far in 2021.
Last week kicked off the first-quarter earnings season. Several major banks reported strong earnings last week which helped lift expectations and sentiment. U.S. regulators announced a planned pause in the J&J vaccine following rare reports of blood clots. Somewhat offsetting this news was the announcement that Pfizer could deliver 10% more of its vaccine by the end of May than initially expected. Consumer spending has been robust, boosted by broader confidence and stimulative efforts. March retail sales increased by nearly 10%, the most since last May. Manufacturing data continued to impress after the gauge of mid-Atlantic factory data hit its highest level in about 50 years. Weekly jobless claims also came in well below expectations at 576,000 and reached a new pandemic low. Closely watched inflation data indicated headline and core price increases both modestly above consensus. Prices across many consumer products continue to increase based on supply disruptions and heightened demand.
International markets kept pace with U.S. counterparts for the week in U.S. Dollar (USD) terms. While both benchmarks rose, the developed, international MSCI EAFE Index beat out the MSCI Emerging Markets Index. European shares increased on the week on hopes for a strong recovery in the economy and earnings despite still elevated coronavirus infections. Japanese stocks were mixed for the week as the yen weakened modestly against the USD. Chinese equities fell over the week, dragged down by technology stocks despite improved macroeconomic data.
German Chancellor Angela Merkel asked Parliament to approve new laws that would increase authorities’ ability to impose strict enforcement measures for regions with high infection rates. England has recently been faring better as it now vaccinated nearly two-thirds of its population. As a result, it started reopening important areas of the economy such as shops and restaurants. A spike in Japanese coronavirus cases dampened positive sentiment from earlier in the week as many feared that it would lead to renewed restrictions which could curb recent improvements in the economy. Key Chinese economic data was overwhelmingly positive. The Chinese economy grew at 18.3% year over year in Q1. Notably, this was relative to a low base reflecting coronavirus restrictions a year ago.
Treasury auctions had high demand, with strong institutional support along with foreign buyers. The yield on the 10-year note fell to 1.57% vs. last week’s 1.65%. Treasuries held by China recorded the highest levels since July 2019. China increased its Treasury holdings by $9 billion to $1.1 trillion. The corporate spread week-to-date for the USD Investment Grade All Sector OAS was wider by approximately 0.04%. Investment-grade funds recorded $6.43 billion of inflows vs. $5.43 billion of inflows the prior week. High Yield funds reported $132 million of outflows vs. $410 million of inflows the prior week. Primary Issuance was dominated by financial companies as major banks reported earnings this week. JPM issued a record $13 billion becoming one of the largest bond deals by a bank. Municipal yields rallied lower as continued inflows and lower Treasury yields drove outperformance. Muni fund inflows for the week tallied $2.25 billion with a record $1.28 billion flowing into high yield municipals as additional stimulus and a recovering economy have eased credit concerns in the search for higher yields.
Wednesday, April 21, 2021
•UK CPI YoY
Thursday, April 22, 2021
•US Jobless Claims
•Japan Core CPI
Sources: The WSJ, T. Rowe Price Global Markets Weekly Update, Goldman Sachs Market Monitor, Piton Investment Management
Data in this report is obtained from sources which we believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. It is provided for your information and guidance and is not intended as specific advice and doesn’t not constitute an offer to sell securities. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss. The Wilshire 5000 Total Market Index measures the performance of all U.S.-headquartered equity securities with readily available price data. The Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market. The Russell 2000 Index is a market-cap weighted index comprised of the smallest 2,000 companies within the Russell 3000 Index, a larger market-cap index made up of the largest 3,000 publicly traded companies in the U.S., nearly 98% of the investable U.S. stock market. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI Europe Index captures large- and mid-cap representation across 15 Developed Markets countries in Europe, covering approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe. The MSCI Emerging Markets (EM) Index captures large- and mid-cap representation across 26 Emerging Markets countries, covering approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Japan Index captures large- and mid-cap representation of the Japanese market, covering approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency bonds, mortgage backed bonds, corporate bonds, and some foreign bonds traded in the U.S. The Bloomberg Barclays Global Aggregate Ex U.S. Index measures the performance of global investment grade fixed-rate debt markets that excludes USD-denominated securities. The Bloomberg Barclays Municipal Bond Index covers the U.S. dollar-denominated long-term tax-exempt bond market. Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Data in this newsletter is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timelines or accuracy of this information. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss.