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U.S. Stock Markets Surged to Record Highs Last Week

Market Data as of Week Ending: 4/9/2021 unless noted otherwise

Equities
U.S. stock markets surged to record highs last week as the bullish theme of robust economic and earnings growth in 2021 remains intact. Investors rotated into quality consumer and tech companies from reopening themes as Treasury yields came under some pressure making growth companies more attractive. Small and medium sized companies lagged their large company peers while value stocks underperformed growth. Sectors that tend to be more cyclical and sensitive such as consumer discretionary and information technology outperformed with gains in each sector. Energy lagged the broader market as oil prices fell after OPEC+ announced it would start to gradually increase supplies later this spring. Developed foreign stocks in Europe and Asia underperformed U.S stocks and Emerging Market stocks lagged developed foreign markets.

 

Bonds
U.S. Treasury yields declined slightly and ended the week at 1.66% as COVID-19 uncertainties persist and the Fed reaffirmed their accommodative stance. Long duration high yield bonds were the best performing asset class while short-term government bonds were the worst performing asset class but still managed to deliver a small gain. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding just over 4.8%.

 

Macroeconomic Data
Economic data released during the week was mixed but was overall more positive as several key reports surprised to the upside. The U.S. service economy surged in March with the ISM survey jumping to 63.7%, as Americans gained more confidence to go out. U.S payrolls increased the most since August as the Labor Department reported that employers added 916,000 jobs in March, well above the estimated 650,000. Jobless claims, however, increased for the second consecutive week as the total filed through the states was 744,000 last week. The producer price index rose 1% in March, the largest annual increase since 2011. Economic data from China’s Qingming holiday weekend resembled pre-pandemic levels as box office and cinema admissions set new records.

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U.S. Treasury Yields Rose, and the 10-year Finished the Week at 1.72%

Market Data as of Week Ending 4/2/2021 unless noted otherwise.

Equities
U.S. stock prices rose over the holiday shortened week as President Biden’s announcement of the infrastructure plan helped buoy financial markets and the focus shifted from rising rates to economic and earnings optimism. Once passed, the bill should help keep U.S. economic growth above trend for longer than previously expected. Small and medium sized companies generally outperformed their large company peers and growth stocks outperformed value. The communication services, consumer discretionary, and information technology sectors were the best performing sectors. Consumer staples, health care, energy, and materials lagged the broader market and ended the week with small losses. Developed foreign stocks in Europe and Asia underperformed U.S stocks and Emerging Market stocks outperformed developed foreign markets.

Bonds
U.S. Treasury yields rose, and the 10-year finished the week at 1.72%. Longer duration bond yields declined, and investment grade corporate bonds were the best performing asset class. Intermediate-term government bonds were the worst performing asset class. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding more than 4.3%.

Macroeconomic Data
Economic data released during the week were mixed. Consumer confidence rose to 109.7 in March, surging to a one-year high as more Americans got vaccinated and the most recent round of stimulus checks hit bank accounts. New unemployment claims rose to 719,000 in late March but is expected to being falling again when the economy continues to reopen. The ISM manufacturing index reach a 38-year high of 64.7 in March as U.S. manufacturers continue to gain momentum. The U.S. added 916,000 jobs in March, bringing the unemployment rate down to 6.0%. Despite continued vaccine rollout challenges and widened lockdown measures in some EU countries, core eurozone government bond yields increased over the week.

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High Yield Bonds were the Best Performing Asset Class

Market Data as of Week Ending 3/26/2021 unless noted otherwise.

Equities
U.S. stock prices were mixed as investors weigh near-term uncertainty with improving prospects for economic growth. Corporate profitability continues to improve as earnings growth estimates for the first quarter rose again during the week. According to FactSet, the current estimated earnings growth rate for the S&P 500 is 23.3%. Small and medium sized companies lagged their large company peers for the second consecutive week and value stocks outperformed growth. Sectors that tend to be more defensive such as consumer staples and real estate outperformed with gains in each sector. Communication services and consumer discretionary lagged the broader market. Developed foreign stocks in Europe and Asia underperformed U.S stocks and Emerging Market stocks lagged developed foreign markets.

Bonds
U.S. Treasury yields declined and finished the week at 1.68%. High yield bonds were the best performing asset class and longer-term bonds outperformed short duration bonds. Short-term government bonds were the worst performing asset class but still managed to deliver a small gain. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding more than 4.4%.

Macroeconomic Data
Economic data released during the week were mixed as the severe winter weather in February was a headwind for home sales and business investment. Weekly initial unemployment claims declined to 684,000, the lowest level of the pandemic, and 4.1 million Americans continue to claim ongoing unemployment benefits. Inflation remains low as the U.S. reported a 1.6% increase in the headline figure while the core measure (excluding food and energy) personal consumption expenditures index increased by 1.4% year over year in February. Core inflation was down from 1.5% in January and still well below the Federal Reserve’s 2% target. Despite rolling coronavirus lockdowns for much of Europe, business activity unexpectedly grew in March to 52, which is the highest level since late 2018.

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The Major Benchmarks Reached New Record Levels

Market Data as of Week Ending: 3/12/2021 unless noted otherwise

EQUITIES

U.S. stock prices advanced and most of the major benchmarks reached new record levels. Earnings growth estimates for the first quarter rose during the week. According to FactSet, the current estimated earnings growth rate for the S&P 500 is 22.1%. Small and medium sized companies outperformed their large company peers as investor sentiment for a sustained economy recovery takes hold. Value stocks outperformed growth, led by strong gains in the real estate, consumer discretionary, and utilities sectors. All eleven major economic sectors were positive, but an eclectic group of communication services, energy, and health care lagged the broader market. Developed foreign stocks in Europe and Asia outperformed U.S stocks and Emerging Market stocks lagged in developed foreign markets.

BONDS

U.S. Treasury yields advanced this past week as President Biden signed the $1.9 trillion American Rescue Plan Act and the Treasury Department announced that the stimulus payment distribution process would begin over the weekend. High yield corporate bonds were the best performing asset class and shorter duration bonds outperformed. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding more than 4.5%.

MACROECONOMIC DATA

Economic data released during the week were better than expected as inflation data was muted and the weekly jobless claims dropped to the lowest level since November. The Labor Department reported lower than expected core inflation (excludes food and energy) coming in at 0.1% for the month of February. Weekly initial unemployment claims declined to 712,000 and 4.1 million Americans continue to claim ongoing unemployment benefits. The ECB announced it would accelerate bond purchases in the second quarter and economic growth for the region was revised lower. Europe has lagged the U.S. and the U.K. with vaccine distribution and continues to deal with more draconian coronavirus restrictions.

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$1.9 Trillion Stimulus Package Passes in the Senate

Market Data as of Week Ending 3/5/2021 unless noted otherwise.

EQUITIES
U.S. stock prices were mixed as long-term interest rates trended higher, reducing the outlook for growth stock valuations. The fourth quarter of 2020 marked three consecutive quarters of better than expected profit growth. 79% of companies in the S&P 500 reported a positive earnings surprise, the third highest since FactSet began tracking this metric in 2008. Analyst have been raising estimates for the first quarter of 2021. According to FactSet, the current estimated earnings growth rate for the S&P 500 is 21.8%. Value stocks outperformed growth led by strong gains in the energy sector as oil prices reached their highest levels in more than a year. Weakness in growth-oriented sectors such as consumer discretionary and information technology, were offset by gains in cyclical sectors such as financials and industrials. declined. Developed foreign stocks in Europe and Asia lagged U.S stocks and Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields advanced this past week as the $1.9 trillion stimulus package passed in the Senate and Fed Chair Jerome Powell remains committed to allowing inflation rise above 2%. Investment grade corporate bonds ended the week yielding approximately 2.2% and high yield corporate bonds are yielding more than 4.5%.

MACROECONOMIC DATA
Economic data released during the week was better than expected but mostly overshadowed by the stimulus package and rising inflation expectations. The February jobs report came in above expectations with nonfarm payrolls rising by 379,000 and the unemployment dropped to 6.2%, a new low since the beginning of the recovery. Germany extended lockdown restrictions until March 28 but relaxed the rules in areas with low infection rates. Japan reported growth in the manufacturing data as the index rose to 51.4 in February from 49.8 in January.

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U.S. Treasury Yields Skyrocketed this Past Week

Market Data as of Week Ending 2/26/2021 unless noted otherwise.

EQUITIES
U.S. equities experienced a choppy week as most indices posted solid losses to close out the month. Investors continue to weigh inflation risks against the improving macro backdrop of ongoing vaccinations, a declining number of coronavirus cases and easy monetary policy. A majority of the volatility was attributed to growing fears among investors that higher inflation and the recent spike in Treasury yields could cause a mass exodus from equities into fixed income. Continuing February’s trend, value stocks outperformed growth stocks by a wide margin as growth stocks logged their worst month versus value since 2000. The energy sector continued its rally as vaccine progress fueled optimism about the reopening of the global economy driving oil prices higher. Consumer discretionary and information technology shares lagged in part by a steep decline in automaker Tesla and Apple. Developed foreign stocks and Emerging Market stocks underperformed U.S stocks as concerns grew that central banks might have to act sooner than expected to quell inflationary pressures that could accompany an economic recovery.

BONDS
U.S. Treasury yields skyrocketed this past week as the outlook for economic growth has become more promising. The 10-year U.S. Treasury yield reached 1.60% midweek, before ending the week at 1.41%. Investment grade corporate bonds ended the week yielding approximately 2.1% and high yield corporate bonds are yielding over 4.9%.

MACROECONOMIC DATA
A full slate of economic data was released last week. Consumer confidence climbed to a three-month high as Americans await stimulus payments and cases continue to decrease. Weekly jobless claims hit their lowest level, 730,000, in three months and recorded their biggest decline since August. Durable goods orders booked their biggest increase in six months, suggesting the economy is gaining steam. Consumer spending jumped 2.4% in January, its first increase in three months, as personal incomes rose by 10.0%. Core inflation rose by 0.3% last month, bringing the PCE price index to 1.5% in th e past year. Fourth-quarter German GDP data were revised up unexpectedly to a growth rate of 0.3% from an initial estimate of 0.1% on strong exports and solid construction activity.

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U.S. Treasury Yield Curve Steepened Last Week

Market Data as of Week Ending 2/19/2021 unless noted otherwise.

EQUITIES
U.S. equities experienced a mixed week as most major indices finished lower. The holiday shortened week started off strong as the combination of further fiscal stimulus, continued accommodative monetary policy and better-than-expected fourth quarter earnings drove optimism higher. However, near-term inflation concerns and the recent uptick in Treasury yields appeared to weigh on risk assets. Medium and large sized company stocks outperformed their small company peers while value outperformed growth across the board. The energy sector enjoyed another positive week as the price of U.S. crude oil eclipsed $60 per barrel for the first time in over a year on Tuesday as the winter storm that swept across Texas disrupted supply. Fast growing tech stocks lagged as the increase in longer-term interest rates raised the discount rate on future earnings. Developed foreign stocks in Europe and Asia outperformed U.S stocks as shares were supported by strong earnings and better-than-expected manufacturing growth. Emerging Market stocks lagged developed foreign markets.

BONDS
The U.S. Treasury yield curve steepened last week on the back of strong economic momentum and increasing inflation concerns. The 10-year U.S. Treasury yield rose by 14bps to 1.34%, its highest level in nearly a year. Investment grade corporate bonds ended the week yielding approximately 2.0% and high yield corporate bonds are yielding nearly 4.8%.

MACROECONOMIC DATA
Economic data released during the week was mostly positive. U.S. retail sales jumped 5.3% in January, its largest increase in eight months, adding to evidence of a rebound in the economy after the most recent round of stimulus and declining COVID-19 cases. Weekly initial unemployment claims climbed to 861,000, showing that Americans are still being laid off nearly a year after the onset of the pandemic. February manufacturing data appeared to weaken as both the Philly Fed index and flash Markit PMI dipped from their January readings. However, the service sector continued its acceleration as the index rose to 58.9 in February. Japan’s Nikkei index has climbed over 30,000 amid a better-than-expected fourth quarter GDP report in which the Japanese economy grew at a 12.7% annualized pace.

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Analysts now Project Double-Digit Earnings Growth for all Four Quarters of 2021

Market Data as of Week Ending 2/12/2021 unless noted otherwise.

EQUITIES
U.S. equities finished higher across the board last week, reaching record highs as optimism was lifted by declining infections and the proposed $1.9T stimulus package. This was the last major earnings week, as 82 companies reported fourth quarter results. Currently 74% of companies in the S&P 500 have reported results, 80% of those companies have beaten EPS estimates while 78% have beaten revenue estimates, well above their 5-yr averages. Due to the strength of these results, analysts now project double-digit earnings growth for all four quarters of 2021. Small and medium sized company stocks built on their out-performance over their large company peers while value outperformed growth in large and small caps. The energy sector enjoyed another positive week as an uptick in production cuts and a drop in U.S. crude inventory drove oil prices higher. The consumer discretionary sector lagged as both Amazon and Tesla weighed on returns. Developed foreign stocks in Europe and Asia outperformed U.S stocks after being buoyed by vaccine progress and improved infection rates. Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields fell for most of last week as the most recent inflation data was subdued. Positive sentiment late in the week lifted the 10-year U.S. Treasury yield by 3bps, closing the week at 1.20%. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding nearly 4.8%.

MACROECONOMIC DATA
Economic data released during the week was mixed. The NFIB small-business index fell to 95.0, marking its lowest level since the beginning of the pandemic as small-business owners have become more pessimistic. Consumer inflation rose at its fastest pace in five months, mostly due to the rise in oil prices. Weekly initial unemployment claims jumped to 793,000, signaling that workers are still losing their jobs despite improving Covid-19 conditions. Consumer sentiment fell to a six-month low of 76.2 as hopes for a stronger economy by summer has dimmed. The UK economy expanded 1.0% in Q4, above expectations, due to strong growth in the government consumption and construction components of GDP.

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112 Companies Reported Fourth Quarter Results

Market Data as of Week Ending 2/5/2021 unless noted otherwise.

EQUITIES
U.S. stock prices rebounded from last week’s sell-off, helped by improved economic data, ongoing fiscal stimulus talks and optimistic vaccine developments. It was an active earnings week as 112 companies reported fourth quarter results. Early earnings results suggest that 69% of S&P 500 companies have beat estimates by one standard deviation, well above the 46% historical average. However, strong earnings haven’t been rewarded this quarter as companies who beat estimates have underperformed the S&P 500 the day after by an average of 100bps. Small and medium sized company stocks outperformed their large company peers while growth stocks outperformed value. All eleven sector’s enjoyed a positive week, with energy stocks outperforming as domestic oil prices hit their highest level in over a year. Healthcare shares lagged the overall market, posting a 0.50%gain. Developed foreign stocks in Europe and Asia lagged U.S stocks after a mixed week which reported a smaller-than-expected growth contraction, but disappointing earnings. Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields were mixed this past week as investment grade corporate bond spreads tightened. The 10-year U.S. Treasury yield rose 8bps, closing the week at 1.17%. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4.8%.

MACROECONOMIC DATA
Economic data released during the week were mixed and overshadowed by optimism surrounding further fiscal relief. Weekly initial unemployment claims declined to a nine-week low of 779,000, suggesting that hiring is slowly picking back up. U.S. manufacturers grew at a slightly slower pace in January as the ISM index slipped to 58.7%. The U.S. unemployment rate fell to 6.3%, reaching a new pandemic low. However, the U.S. regained a meager 49,000 jobs in January suggesting the decline in unemployment may be tied to people dropping out of the labor force. The Bank of Japan is likely to begin allowing its long-term government bond yields to rise through a reduction of long-term bond purchases.

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U.S. Stock Prices Declined Sharply Amid Heightened Trading Volumes and Volatility

Market Data as of Week Ending 1/29/2021 unless noted otherwise.

EQUITIES
U.S. stock prices declined sharply amid heightened trading volumes and volatility as markets saw the largest hedge fund de-grossing since February 2009. Fourth quarter U.S. GDP missed consensus estimates and remained below pre-pandemic levels, reflecting the continued affect of the pandemic. Company earnings continue to roll in as over one-third of companies in the S&P 500 have reported results as of the 29th. Earnings are projected to end 2.3% lower than last year, an improvement on the 4.8% decline that was expected. Large and medium sized company stocks generally outperformed their small company peers while growth versus value was mixed. Ten of the eleven sector’s posted negative returns, as real estate was the only sector to post a gain. Developed foreign stocks in Europe and Asia lagged U.S stocks due to the COVID-19 vaccine supply disagreement and the IMF’s downward revision of its UK’s growth forecast. Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields moved lower this past week as intermediate and longer term yields declined. The 10-year U.S. Treasury ended the week at 1.09% after breaching 1.0% briefly midweek. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4.9%.

MACROECONOMIC DATA
Economic data released during the week were mixed and overshadowed by short-squeeze battles that triggered extreme price fluctuations among several stocks. Weekly initial unemployment claims declined to a three-month low of 847,000, as layoffs still remain extremely elevated. Consumer confidence rose to 89.3 in January as optimism surrounding the vaccine increased. Consumer spending decreased 0.2% while incomes rose 0.6% in December, suggesting consumers have money to spend once they regain confidence in the economy. Portugal announced that lockdown restrictions will be in place until mid-February, while France debates over implementing its third lockdown.

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