Conway’s QuickTake: Week of March 29, 2021
|Here’s What Happened Last Week: |
U.S. Equities and Economic Data/News
Major indices were mixed for the week as investors contrasted the economic reopening with interest rate and inflation concerns. After Friday’s upsurge to close the week, the S&P 500 ended in positive ground but the tech-heavy Nasdaq Composite Index was still underwater by 0.6%. Weighing on sentiment was the unexpected blockage of the Suez Canal by a major cargo ship named the Ever Given. Not only are the goods on that ship not being delivered, as many as 300 other ships sit in queue as well as other ships which opted to take the 15,000-mile detour around Africa. A hopeful high tide is the best bet to free the ship and limit anymore supply chain damage. Most sectors of the S&P 500 were positive aside from communication services which fell nearly 4% after several media company stocks declined, likely exacerbated by volatile trading. Real estate and consumer staples led all others and rose about 4% each. Large-cap stocks rose and led small-caps which declined but still retain a solid advantage over large-caps for the year. Value stocks marginally led growth although the disparity was minor.
As was done in Europe the week prior, last week the AstraZeneca developed vaccine was proven to have been safe and effective in U.S. trials. Newly released data showed it effectively prevented severe disease and hospitalizations. Despite new case counts rising in a few states, pandemic-related news had bright spots. President Biden stated his new goal of vaccinating 200 million Americans in the first 100 days of his administration (through the end of April), double the initial estimate. Also, many states have already or soon will make vaccinations available to anyone over 16 years of age. February existing home sales fell 6.6% while new home sales plummeted by 18.2%, far more than forecasted but the severe winter weather may partially be to blame given the hardships it presented. Offsetting this, initial weekly jobless claims fell to the pandemic-low level of 684,000. A focus for many investors, the latest inflation data was largely muted after the core personal consumption expenditures index increased by 1.4% year-over-year in February, well below the Fed’s sustainable target range of 2%.
International Equities and Economic Data/News
Both developed international and emerging markets equities fell last week in U.S. Dollar terms. Emerging markets fell more though after the strong U.S. Dollar declines in Chinese stocks. European and Japanese stocks were flat and down respectively as both regions digested the global economic reopening, but struggle with some COVID-19 breakouts and vaccine deployment efforts. Chinese equities rose last week in local currency terms after the country’s central bank indicated it would not tighten its monetary policy regime. Like other global markets, China is undergoing a rotation from growth to value while local real estate companies performed well.
European countries announced varied stages of lockdowns. France extended its lockdown to include a third of the country but is reportedly less strict than the past. Belgium said non-essential businesses will be closed for the next four weeks, and Germany debated internally to enforce new lockdowns. It ultimately decided not to after the amount of recoil its citizens displayed. Japan’s Diet approved a new record ¥106.61 trillion ($976 billion) budget for the 2021 fiscal year. The intent of the relief funds is to offset the damage created by the pandemic as well as other increasing costs. China’s goal of becoming carbon neutral by 2060 comes with a heavy price tag north of $6 trillion. In 2020, China installed 50 gigawatts of wind power which accounts for 70% of the world total. This shift to renewable energy is expected to increase global demand for some raw materials including copper, nickel, and aluminum among others, a strengthening factor for commodities.
The long end of the curve led yields lower into Friday as the spread between the 5-year note and 30-year bond flattened by 5 bps on the week. Heading into the final days of the quarter, the 10-year yield dropped from highs of 1.72% on March 19th to 1.65% last Friday. The corporate spread week-to-date for the USD Investment Grade All Sector OAS was tighter by four bps. Investment grade funds recorded $3.26 billion in inflows vs $5.4 billion in inflows the prior week. High Yield funds reported $1.3 billion in outflows vs $410 million in inflows the prior week. Municipal bond benchmark yields were 5-7 bps lower on the week. Likewise, municipal funds saw inflows of $592 million for the week ending 3/24. Primary market activity continues to be well received with several deals re-pricing yields lower. Ratings agencies have lifted their negative outlook on almost all municipal sectors because of the $1.9 trillion stimulus package.
Tuesday, March 30, 2021
•China Composite PMI
Wednesday, March 31, 2021
•Euro area Harmonised Index of Consumer Prices
Thursday, April 1, 2021
•US Jobless Claims
•US ISM Manufacturing Survey
•UK Manufacturing PMI
Friday, April 2, 2021
•US Nonfarm payrolls
Sources: The WSJ, T. Rowe Price Global Markets Weekly Update, Trading Economics, Goldman Sachs Weekly Market Monitor
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.