Economic data for the week included gains in existing home sales and housing starts, along with continued rising prices and tight inventory. Jobless claims were mixed, with seasonal effects affecting near-term claims, while continuing claims showed ongoing improvement.
U.S. equity markets rebounded into positive territory last week after a sharp Monday downturn, fueled by fears around the Covid Delta variant. Foreign stocks in developed markets gained to a lesser degree, while emerging markets lost ground. Domestic bond prices ticked slightly higher as yields and credit spreads continued to decline. Commodities were mixed, despite some early week demand concerns for crude oil, which later recovered.
Economic data for the week included strong consumer and producer inflation readings, as well as improvements in retail sales and industrial production. Jobless claims also continued to fall, while consumer confidence waned a bit.
Stocks were mixed globally last week—the U.S. and developed foreign markets lost ground, while emerging markets gained. Bonds fared positively as yields on the treasury curve continued to fall. Commodities were mixed, with crude oil prices pulling back by a few percent, partially offset by ag prices.
During an abbreviated week, economic data included a decline in services sentiment, although the measure remained quite strong. Job openings improved, while jobless claims were mixed—as initial claims rose but continuing claims sustained their decline.
U.S. equity markets gained slightly last week, outperforming foreign—especially emerging markets which fell back sharply. Bonds in the U.S. and developed markets gained as interest rates continued to fall, surprisingly many investors. Commodities lost ground last week, largely led by declines in the grain complex.
Economic data for the week included a jobs report that came in a bit better than expected, in addition to strength in consumer confidence, home prices, and other labor metrics such as improved jobless claims. On the other hand, manufacturing sentiment declined a bit—but remained at a very high level.
U.S. equity markets moved to new highs along with continued improving economic data, while foreign stocks were held back by Covid and inflation fears. Bonds fared well as interest rates continued to temper across the curve. Commodities gained across the board, notably in agriculture last week.
Economic data for the week included unchanged GDP growth for the prior quarter, as well as stronger durable goods orders and jobless claims, while both existing and new home sales fell along with continued low inventories.
Global equity markets gained last week, led by the U.S., and particularly in small cap, due to news of a broader infrastructure agreement framework and more dovish Fed talk. Bonds were mixed, with higher rates holding back U.S. debt, while foreign bonds were boosted by a weaker dollar. Commodities gained across the board, with strength in energy and metals.
Economic data for the week included strength in industrial production and housing starts, but offset by weaker retail sales results. Initial jobless claims rose slightly, although the overall rolls continue to improve. The U.S. Federal Reserve kept interest rates on hold (at zero), as expected, but several committee members assumed some tightening by 2022-23.
U.S. equity markets declined last week along with slightly more ‘hawkish’ Federal Reserve language about future interest rate policy—acknowledging a steady return to normal. Foreign stocks fared a little better in local terms, but were held back by a stronger dollar. Bonds were flattish in the U.S. on net, despite some rate volatility during the week, and outperforming foreign debt. Commodities were down across the board sharply, aside from higher prices for crude oil.
The Federal Reserve Open Market Committee made no changes in monetary policy today, keeping the target short-term interest rate at 0.00-0.25%. The official statement was little changed in substance, with wording about the hardship caused by the Covid-19 pandemic replaced by the improvement due to wider vaccinations.
The most recent Fed member estimates (seen in the ‘dot plots’) point to a greater chance of a rate hike or two by 2023 than the previous March plot. (This realization caused a quick stock market drop.) To put it into perspective, a fed funds rate of 0.25% or 0.50% a few years from now still counts as quite accommodative, even if not the zero of today. The clustering of longer-term fed funds rate expectations remains around 2.5%. This implies, assuming the 2.0% inflation target is achieved and maintained, a real yield of 0.5%. This is below the multi-decade historical norm of about 1.0% for cash, but certainty an improvement on today’s miniscule yields (welcomed by savers), even if it takes time to get there.
The key question is when will the ‘tapering’ off of ongoing $120 bil./mo. treasury and mortgage bond purchases begin? ‘Talking about tapering’ has been the much-talked-about first step, followed by actually doing it. Hardly anyone thought it would happen at today’s meeting, but the timeline has certainly moved earlier after the strength in recent months. Only once tapering goes on for a while will rates likely start rising. Interestingly, based on CBOE fed funds futures, the probability of no change today had fallen to 93%, with the remaining 7% betting on a quarter-point increase. These odds remain consistent through December.
Most of the Fed’s metrics are showing improvement, as seen in many data releases:
Economic data for the week included stronger consumer inflation results, as well as higher job openings, and continued decline in the number of weekly jobless claims.
U.S. and European equity markets saw further gains, with accommodative policy and tempered longer-term inflation expectations swaying sentiment. Bonds earned positive returns as well, along with falling long-term interest rates. Commodities ticked higher, largely due to crude oil and natural gas prices.
On a Memorial-Day shortened week, economic data included strong results for manufacturing and services indexes. Employment numbers were mixed, as jobless claims improved, as did the employment situation report number, although the latter fell short of market expectations.
Global equity markets earned positive returns last week, with stronger economic data coupled with eased worries about the duration of continued government policy support. U.S. bonds gained slightly as interest rates pulled back after a lackluster jobs data. Commodities continued to gain ground, largely due to higher oil and natural gas prices last week.
Economic data for the week included largely unchanged Q1 GDP estimates, and a decline in durable goods orders. On the housing side, prices continue to show strong momentum, while sales fell due to increasingly tight inventories. Jobless claims continued to improve and point to labor market repair.
Global equity markets continued to benefit from strong economic rebound activity and consumer sentiment. Bonds also benefitted from a pullback in interest rates. Commodities were led by demand expectations for energy and metals.
Economic data for the week included declines but still-strong readings for key regional manufacturing indexes, and a pullback in home sales and starts, while jobless claims improved and the index of leading economic indicators continue to show strength.
U.S. equity markets declined last week, and underperformed gains in foreign markets along with improved sentiment for the future. Bonds were little changed, along with minimal change in the yield curve. Commodities were mixed, with most falling into the negative, including lower oil and metals prices.
U.S. stocks were down on net, with concerns over inflation mixing in with positive news about stronger economic data and vaccine-fueled reopenings. Early in the week, Treasury Secretary Yellen’s comments in favor of higher taxes and unions seemed to not please market sentiment, nor did Fed minutes discussing the idea of a ‘taper,’ while a pared-back infrastructure bill revision may have helped. The defensive group of utilities, health care, and consumer staples were the only sectors in the positive, in addition to a strong week for real estate. Energy, materials, and industrials fared worst, with declines well over a percent.
We’re reluctant to mention bitcoin, but the price has fallen over -50% from an April high of $65,000, before rebounding 40% within hours. The unfolding of this could have added to equity market volatility, and again shows the unique nature of cryptocurrency markets (a volatile store of value of there was one). Other than Elon Musk’s comments, the announcement about the Chinese government further restricting its use as a payment mechanism, as well as additional official reviews from other governments, have put a damper on the excitement as the outcomes become more bimodal.
Aside from ongoing fears of persistence in inflation, another market worry that appears to be taking up space is the growing possibility of corporate tax hikes. The 21% rate cut from 2017 is under threat, with consensus new rate of the 25-28% range (assuming that initial Democratic targets are lowered to garner broader support). While a net negative, it would still be far below the 35% top rate from pre-2017 period. And, as is the case of personal income tax rates, the top rate is just that—the average tax rate paid is far lower. Nevertheless, such legislation would trim earnings expectations for 2022 and beyond.
Foreign stocks gained mostly across the board, aside from the U.K., with Japan in the lead, followed by emerging markets. In Europe and other areas, slowing infection rates and an increased pace of reopenings continued to lead investor sentiment. This was evidenced by strong PMI figures in Europe and Japan, showing improved expansion in conditions. While emerging markets are still with large challenges from Covid infections and being far behind in vaccinations, compelling valuations a stronger cyclical tilt when conditions do improve remain in positive points in favor of non-U.S. equities.
U.S. bonds were little changed to slightly higher by a few basis points, as interest rates were steady across the yield curve. So, therefore, very little to report in terms of price change. A slightly weaker dollar helped developed market foreign bonds, which gained almost a half-percent for the week, while emerging market bonds fell back slightly.
Commodities lost ground on net, despite the normally positive influence of a weaker dollar. Declines in energy, agriculture, and industrial metals of up to several percent were offset by a rise in precious metals of nearly 2%. The price of crude oil declined by nearly -3% to around $63.50/barrel, as some supply concerns abated—mostly due to apparent progress on a renewed U.S.-Iran nuclear deal, which would bring more future oil supply to market.
Period ending 5/21/2021
1 Week (%)
BBgBarc U.S. Aggregate
U.S. Treasury Yields
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.
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Economic data for the week included a surprise higher for consumer inflation, with the strongest monthly report in decades, along with strong readings for producer price inflation and import prices. Industrial production also came in positively, while retail sales and consumer sentiment fell back a bit from a stronger prior months.
Equity markets experienced higher volatility last week as early fears of inflation were eventually replaced by optimism over the CDC’s looser recommendations about mask-wearing. Bonds fell back as higher long-term rates again pulled prices lower. Commodities were mixed, with gains in energy and declines in industrial metals and agriculture.