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Weekly Investment Perspective

Keep up-to-date with our Weekly Investment Perspective.

Despite an underwhelming employment report on Friday, U.S. equities edged higher last week driven by continued focus on reopening momentum and rising corporate earnings expectations amid strong first quarter results. For the week, the S&P 500 and Dow Jones gained 1.3% and 2.7% respectively, but the tech heavy Nasdaq Composite fell -1.5% as the rotation out of expensive, high-growth stocks into cyclical stocks leveraged to the economic reopening gained traction. Last week’s rotation was in part triggered by comments from White House Treasury Secretary Janet Yellen, who indicated that interest rates may need to “rise somewhat” to counter upward pressure on asset and goods prices from fiscal stimulus and government spending plans. The comment tapped the breaks on pricey growth stocks whose valuations are underpinned by the expectation that interest rates and overall economic growth will remain lower for longer.

U.S. job growth in April missed the mark by a wide margin last week, according to the monthly report from the Bureau of Labor Statistics, which recorded a 266k increase in nonfarm payrolls compared to expectations for nearly 1 million jobs added. The unemployment rate ticked up to 6.1% from 6.0% in March as more people entered back into the labor force looking for work. Labor shortages have received the bulk of the blame as employers have cited several obstacles to hiring including enhanced unemployment benefits, lack of access to child care, supply chain bottlenecks, and lingering coronavirus fears. However, the disappointing report may have been driven lower by temporary seasonal factors and the year-to-date momentum remains strong. The weekly employment data on citizens filing for unemployment insurance continues to move in the right direction with continuing claims reported at under 3.7 million last week compared to the Covid peak of over 23 million, though there are still over 11.8 million citizens receiving support through special pandemic unemployment assistance programs.

The miss in employment data has not derailed rising expectations for economic growth and inflation, particularly as supply chain issues have put additional upward pressure on prices in the short-term. On Friday, a ransomware cyberattack forced a shutdown of the Colonial Pipeline, America’s largest fuel pipeline that transports roughly 2.5 million barrels of oil per day from the Gulf Coast to eastern states. The pipeline is expected to reopen later this week as gas stations along the East Coast have started to run out of fuel. Meanwhile, industrial metal prices are also surging with copper prices posting a record high for the first time in over a decade on Friday. Copper prices are up over 33% so far year-to-date and have nearly doubled over the past year fueled by growing demand from manufacturing and construction.

Corporate earnings results have provided an offset to inflation concerns and a moderation in economic data. With earnings results for 90% of S&P 500 constituents in the book, the index overall is on track for a remarkable 49% increase in earnings compared to the first quarter of 2020. That compares to consensus expectations for a growth rate of just over 20% for the quarter at the end of March.

As earnings season winds down in the week ahead, investors will turn their attention to updated inflation and consumer data readings. Core consumer and producer prices are forecast to have risen 2.3% and 3.9% year-over-year, respectively (or 3.6% and 5.9% including food & energy). Meanwhile, retail sales growth is expected to moderate a bit to a 0.7% increase in April after jumping 9.7% in March from February’s levels with a boost from stimulus checks.

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Previous Perspectives

Weekly Investment Perspective May 11, 2021

May 11, 2021
Despite an underwhelming employment report on Friday, U.S. equities edged higher last week driven by continued focus on reopening momentum and rising corporate earnings expectations amid strong first quarter results. For the week, the S&P 500 and Dow Jones gained 1.3% and 2.7% respectively, but the tech heavy Nasdaq Composite fell -1.5% as the rotation out of expensive, high-growth stocks into cyclical stocks leveraged to the economic reopening gained traction

Weekly Investment Perspective May 4, 2021

May 4, 2021
U.S. equity markets broadly moved sideways last week but closed out the month of April with the highest monthly gain since November amid a streak of strong earnings reports and continued signs of a robust U.S. economic recovery powered by stimulus and the vaccine rollout. The S&P 500 gained 5.3% for the month of April, bringing its year-to-date performance to 11.8%, while the Nasdaq Composite and Dow Jones advanced 5.4% and 2.8% for the month, respectively, with tech stocks retaking the lead on strong earnings results.

Weekly Investment Perspective April 27, 2021

April 27, 2021
Despite another strong week of corporate earnings announcements, U.S. equity markets took a pause from their year-to-date surge last week as market participants digested the announcement of President Biden’s proposal to increase the capital gains tax rate for high income households and monitored concerning global trends in Covid-19 cases. The major U.S. equity indices ended the week in the red but recouped most of their losses on Friday following robust economic data including indications of growing demand for the U.S. service sector and a 20% month-over-month increase in new home sales in March. The S&P 500 ended -0.1% lower for the week and the Dow Jones and Nasdaq Composite were down -0.4% and -0.3%, respectively.

Weekly Investment Perspective March 30, 2021

March 30, 2021
Despite an eventful week with a large segment of global trade stalled by a massive cargo ship stuck in the Suez Canal and the unwinding of an overleveraged hedge fund, equity markets broadly were undeterred with the S&P 500 and Dow Jones pushing to new all-time highs last week. Positive investor sentiment was aided by encouraging news on the vaccine rollout and the Federal Reserve’s decision to end restrictions on dividends and buybacks for U.S. banks.

Weekly Investment Perspective March 09, 2021

March 9, 2021
U.S. stock and bond markets had another bumpy ride last week as long-term interest rates continued to push higher on the back of robust vaccine and economic data and progress toward another round of stimulus, which was approved by the Senate over the weekend. For the week, the Dow and S&P 500 managed to post positive gains of 1.9% and 0.8%, respectively, as economically sensitive sectors like energy, industrials, and materials lifted the indices higher and offset weakness in information technology.

Weekly Investment Perspective February 23, 2021

February 23, 2021
U.S. equity markets slid lower last week amid a notable backup in long-term interest rates due to an improving economic outlook and growing expectation for more government debt issuance to fund stimulus and resulting upward pressure on inflation. Coronavirus cases, hospitalizations, and vaccine doses administered all continued to trend in an encouraging direction, which has bolstered growth expectations alongside last week’s very strong retail sales numbers.