Economic Update 11-15-2021
- Economic data for the week included higher ongoing readings for producer and consumer price inflation—the latter rising at the fastest year-over-year rate in three decades. The trend in improving jobless claims also slowed, and consumer confidence fell.
- Global equity markets declined in keeping with a higher U.S. inflation report, weaker sentiment, and rising foreign Covid cases. Bonds reversed course and pulled back as long-term rates ticked higher. Commodities were mixed, but energy fell back contrary to recent trends.
U.S. stocks fell back on the week, along with CPI inflation results running at their highest levels in 30 years. Results were mixed by sector, with materials stocks having gained nearly 3% along with stronger sentiment surrounding infrastructure plan passage, while consumer discretionary stocks fared worst, down over -3%. The latter was led by an Elon Musk tweet announcing the sale of a portion of holdings. Real estate was little changed, despite the rise in interest rates.
One of the highlights of the prior week, which wasn’t discussed to a large degree in the midst of earnings reports, was the announcement of the high efficacy of Pfizer’s antiviral Covid treatment. In trials, it appeared to dramatically reduce death and hospitalizations (by 90%), which is significant in terms of treatment options. Along with now-available vaccines for children aged 5-11, such advancements increasingly allow investors to visualize an end-game to Covid, at least in the developed world, although conditions haven’t normalized yet from a policy or practical standpoint. Even the hint of normalization has given consumer discretionary stocks and airlines a boost, where activity has continued to plod well below pre-Covid levels.
Foreign stocks were mixed, with declines in Europe and Japan offset by gains in emerging markets. Covid cases continued to weigh on sentiment, particularly in Denmark, Holland, and Italy. In EM, positive results were led by China and Brazil, with an announcement of policy easing in the former, while other areas were down in keeping with global markets generally.
U.S. bonds fell back last week as interest rates rose by Friday, reversing a sharp drop earlier in the week as CPI was released. Treasuries outperformed corporates, in keeping with credit spreads also ending wider. The auction for long bonds didn’t end as strongly as the market had perhaps hoped, which may have also contributed to rising yields, in addition to the strong inflation print. The dollar strengthened dramatically, which led to larger declines, of a percent or more, for international bonds.
Commodities were little changed on net, with gains in agriculture and metals offset by a decline in energy prices. The price of crude oil fell back by a fraction of a percent to just under $81/barrel, while natural gas prices corrected by over -10% as production increases beefed up supply.
|Period ending 11/12/2021||1 Week (%)||YTD (%)|
|BBgBarc U.S. Aggregate||-0.75||-1.69|
|U.S. Treasury Yields||3 Mo.||2 Yr.||5 Yr.||10 Yr.||30 Yr.|
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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