By: Ariel Segal
U.S. durable goods declined in the month of February by 1.1%, while surveyed estimates expected a 0.5% increase. The decrease was broad and not concentrated to a single industry. Supply chain issues are still limiting production, but the gradual increase in demand and stimulus is a boon to these manufacturers.
Ships have started moving again through the Suez Canal today as the giant container ship that was stranded, blocking the waterway for a week was freed. The canal’s closure will likely have a small long-term impact as the $10-billion-per-day cost to trade is inconsequential compared to total yearly global merchandise trade.
Annualized GDP quarter-over-quarter was reported to be inline with estimates on Thursday.
The seven-day average of nationwide hospitalizations has increased for the first time since January 11th. 535 million vaccine doses have been given worldwide, with 143 million of them be given in the U.S.
Fixed Income Market:
By Joseph Colleran
The US Credit markets remained steady despite the volatility seen in UST’s and equities last week. Both IG and HY spreads remained mostly unchanged WoW. A noteworthy development took place in the HY New Issue market. Through Friday, the total US HY New issuance for the year stands at $143 BLN – a new all-time record for total issuance in any Q1. This exemplifies the ongoing quest for yield and the willingness of investors to take on HY risk to find it. At the same time, with yields still near historical lows, corporate treasurers are very willing to issue debt at a relatively low cost.
As the quarter draws to a close, we continue to see strong client demand in the structured note sector as increased volatility in equities is helping to provide attractive coupon levels on the favored index-based S/N’s.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $4.9 BLN
IG Bond Funds up $3.3 BLN
HY Bond Funds down $1.4 BLN
Municipal Bond Funds up $0.4 BLN
Domestic Equity Funds down $0.6 BLN
IG Bond Funds up $5.4 BLN
HY Bond Funds up $0.4 BLN
Municipal Bond Funds up $1.05 BLN
By: James Zurovchak
US Treasury rates gave equity markets a reprieve last week as the yield on the 10yr eased back to trade between 1.60-1.65% most of the week. S&P 500 and DJI responded in kind posting gains of 1.6% and 1.4%, respectively and each setting new all-time closing highs on Friday. Despite finishing the week strong on Friday, NASDAQ was down 0.6% on the week. The move higher in equities was fairly broad based as 9 of 11 GICS sectors were up on the week, led by Consumer Staples (+3.9%), Real Estate (+3.5%), Energy (+2.9%). Communication Services (-1.1%) and Consumer Staples (-0.1%) were the only losers on the week. Value and Growth finished the week +1.4% and +1.2% respectively. Despite a strong close to the week on Friday, Small Caps underperformed on the week posting a 2.9% decline. Focus this week will be on Friday’s jobs report, the unveiling of Biden’s infrastructure spending plan and the continued push and pull between cyclical and growth stocks. Expect some volatility as this week marks quarter end as well as Passover and a long Easter weekend with markets closed on Good Friday.
By Anthony Minardo
The US Dollar finished the week at/or near four-month highs vs. most G10 currencies. The move higher in the U.S. bond market yields continues to be the catalyst for the recent strength of the U.S. dollar. Economic numbers for the week of March 22-26 were mixed as we saw weaker home and existing sales, but stronger than expected GDP printed at 4.3% (forecast was 4.1%). This week we will watch the always important ADP employment numbers out on Wednesday and U.S. employment numbers for March are reported on Friday. The economic forecast for both numbers is quite strong, the ADP forecast is +550,000 and the change in Non-Farm Payrolls forecast is +643,000. The markets are also predicting a drop in the Unemployment rate from 6.2% to 6.0%.
By Brian Stigliano
The Power of Rebalancing
Buy low and sell high. It’s easier said than done. However, it can be made easier with a diversified portfolio through the power of rebalancing. Rebalancing is a mechanism for maintaining the asset allocation of a portfolio by selling an asset that has grown too large and using the proceeds to buy an asset that has become too small.
For example, consider a two-asset portfolio made up of 50% of an S&P 500 mutual fund (stocks) and 50% of an aggregate bond mutual fund (fixed income). In 2020, the stock portion would have grown much more than the fixed income portion. Therefore, rebalancing at the end of 2020 would have consisted of selling a portion of the S&P 500 mutual fund and buying more of the bond mutual fund. This would have forced you to sell high on the stock allocation and buy (relatively) low on the fixed income allocation.
Rebalancing does not have to be limited to the relationship between stocks and fixed income. You can rebalance your stock portfolio by selling and buying growth/value styles as one typically performs better than the other. In general, the more diversified the portfolio, the more opportunities there are to rebalance.
This Week's Economic Data 3/30
|This Week's Economic Data||Release Date||Survey|
|ADP Emplyment Change||3/31/21||550k|
|Initial Jobless Claims||4/1/21||680k|
|Change in Nonfarm Payrolls||4/2/21||730k|
|Source: Bloomberg L.P.|
Last Week's Economic Data 3/30
|Last Week's Economic Data||Actual||Survey|
|New Home Sales||775k||870k|
|Durable Goods Orders||-1.1%||0.6%|
|Initial Jobless Claims||684k||730k|
|GDP Annualized QoQ||4.3%||4.1%|
|Wholesale Inventories MoM||0.5%||0.8%|
Market Data Values 3/30
|Interest Rates||Current||WoW||MoM||YoY||US Swap Spreads||Current||WoW||MoM||YoY|
|1 Month Libor||0.11%||+0.1 bp||(1.0 bp)||(88.1 bp)||12-Month||+16 bp||+1.2 bp||+4.0 bp||(43.0 bp)|
|3 Month Libor||0.20%||+1.2 bp||+1.4 bp||(124.8 bp)||2-Year||+13 bp||+1.9 bp||+3.6 bp||(13.0 bp)|
|6 Month Libor||0.20%||(0.1 bp)||(0.0 bp)||(86.9 bp)||3-Year||+16 bp||+4.0 bp||+5.0 bp||(3.6 bp)|
|12 Month Libor||0.28%||+0.5 bp||(0.2 bp)||(68.7 bp)||5-Year||+10 bp||+4.7 bp||+2.5 bp||(4.6 bp)|
|Fed Funds Effective||0.07%||(3.0 bp)||7-Year||+2 bp||+6.6 bp||(1.9 bp)||(4.2 bp)|
|SOFR||0.01%||10-Year||+3 bp||+10.8 bp||+22.8 bp||+111.1 bp|
|US Treasury Yields||Current||WoW||MoM||YoY||30-Year||(23 bp)||+10.9 bp||+21.3 bp||+140.8 bp|
|12-Month||0.06%||(0.3 bp)||(1.0 bp)||(3.6 bp)||Equity Markets||Current||WoW||MoM||YoY|
|2-Year||0.14%||(0.7 bp)||+1.4 bp||(10.1 bp)||Dow Jones||33,171||+0.0%||+0.1%||+0.5%|
|3-Year||0.31%||(0.5 bp)||+3.8 bp||+2.3 bp||S&P 500||3,971||(0.0 %)||+0.0%||+0.6%|
|5-Year||0.89%||+2.5 bp||+15.6 bp||+49.4 bp||NASDAQ||13,060||(0.0 %)||(0.0 %)||+0.7%|
|7-Year||1.36%||+2.2 bp||+24.5 bp||+80.2 bp||Currencies||Current||WoW||MoM||YoY|
|10-Year||1.71%||(0.7 bp)||+1.4 bp||(10.1 bp)||Euro||1.1769||(0.0 %)||(0.0 %)||+0.1%|
|30-Year||2.41%||(0.7 bp)||+1.4 bp||(10.1 bp)||Japanese Yen||109.7700||(0.0 %)||(0.0 %)||(0.0 %)|
|US Swap Rates vs 3ML||Current||WoW||MoM||YoY||British Pound||1.3765||+0.0%||(0.0 %)||+0.1%|
|12-Month||0.21%||+0.9 bp||+3.0 bp||(46.6 bp)||Canadian Dollar||1.2585||-||+0.0%||+0.1%|
|2-Year||0.27%||+1.3 bp||+4.9 bp||(23.1 bp)||Australian Dollar||0.7636||+0.0%||(0.0 %)||+0.2%|
|3-Year||0.47%||+3.5 bp||+8.8 bp||(1.3 bp)||Swiss Franc||0.9389||(0.0 %)||(0.0 %)||+0.0%|
|5-Year||0.99%||+7.2 bp||+18.1 bp||+44.8 bp||Israeli Shekel||3.3320||(0.0 %)||(0.0 %)||+0.1%|
|7-Year||1.39%||+8.8 bp||+22.6 bp||+75.9 bp||Bitcoin||57,777||+0.1%||+0.2%||+7.9%|
|10-Year||1.74%||+10.2 bp||+24.2 bp||+101.0 bp||Commodities||Current||WoW||MoM||YoY|
|30-Year||2.17%||+10.3 bp||+22.7 bp||+130.7 bp||Gold||1,713||(0.0 %)||(0.0 %)||+0.1%|
|Silver||25||(0.0 %)||(0.1 %)||+0.8%|
|Copper||405||(0.0 %)||(0.0 %)||+0.9%|
|Source: Bloomberg L.P.||Crude Oil||62||+0.1%||+0.0%||+2.1%|
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