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Week in Review: March 26, 2021

Recap & Commentary

Equity markets generally ended lower, following a week that seemed to lack clear direction. For the past several months investors have focused on fiscal stimulus, monetary policy and vaccine rollouts. With all of those factors currently reflected in the markets, it begs the question “What will be the next big macro event to influence markets?” In the near-term, the short answer is that there doesn’t appear to be any. Yes, there are currently discussions in Washington about an infrastructure spending bill, which by some estimates could reach $3T, but following the $1.9T stimulus package passed earlier this month, it is unclear if the political appetite exists to tackle another large spending bill at this time. Also, talk is emerging about raising taxes, most likely on corporations and wealthy individuals, but again it is unclear if there is the necessary support to enact such measures. Thus, for the time being, markets may end up being range bound, taking their daily que from interest rates, and other fundamental data, until a new top-down driver emerges.

On Thursday, President Biden increased his goal for the number of vaccines administered within his first 100 days in office from 100M to 200M. The success of US vaccination efforts stands in stark contrast to Europe, where the sluggish pace of  vaccinations coupled with rising cases has led to renewed lockdowns.

Economic Bullet Points

For all the talk of higher inflation, core PCE, the Fed’s preferred measure, rose just 0.1% in February.  Compared to a year earlier, prices were up only 1.4%.  In the coming months, the Fed expects inflation to increase, as economic activity improves and 2021 data “laps” last year’s very weak levels. However, the increases are expected to be transitory, as opposed to structural, in nature.

Personal incomes and consumer spending pulled back in February as the benefits of the second stimulus package passed in late December faded.  Consumer spending was also impacted by unseasonably cold weather. Most economists expect the declines to be short lived as additional stimulus flowed into the economy in March.

Sales of existing and new homes fell in February, impacted by severe winter weather, declining inventory, and rising prices. Existing home sales fell 6.6%.  However, compared to a year earlier, sales rose 9% and the median price increased nearly 16% to $313K, while inventory fell 29.5%, to 1.03M homes, tied with January for the lowest level on record back to 1982.  New home sales fell 18% in February.  Compared to a year earlier, sales rose 8%, while the median price rose 5% to $349K.

Weekly jobless claims fell 97K to 684K, the lowest level since the start of the pandemic. While directionally positive, the number remains significantly higher than pre-pandemic levels.  Continuing claims fell ~260K to 3.87M.

Of Note

Maritime travel through the Suez Canal came to a halt after the 1,300 foot-long Ever Given, one of the largest container ships in the world, capable of carrying 20,000 containers, became lodged sideways. By the weekend nearly 300 ships were backed up waiting to pass through the canal which handles ~12% of global trade of all goods and 30% of global container volume.

Market Indices Week of 03/26

S&P 5001.6%
Small Caps-2.9%
Intl. Developed-0.6%
Intl. Emerging-2.2%
Commodities-0.5%
U.S. Bond Market0.5%
10-Year Treas. Yield1.68%
US Dollar0.9%
WTI Oil ($/bl)$61
Gold ($/oz)$1,732

The Week Ahead

  • March Employment Report
  • Pending Home Sales
  • ISM Manufacturing
  • Consumer Confidence
  • Weekly Jobless Claims

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