𝘼𝙣𝙤𝙩𝙝𝙚𝙧 𝙨𝙩𝙧𝙤𝙣𝙜 𝙬𝙚𝙚𝙠 𝙛𝙤𝙧 𝙩𝙝𝙚 𝙐𝙎 𝙚𝙦𝙪𝙞𝙩𝙞𝙚𝙨 𝙞𝙨 𝙗𝙚𝙝𝙞𝙣𝙙 𝙪𝙨. 𝙐𝙎 𝙖𝙡𝙨𝙤 𝙘𝙡𝙚𝙖𝙧𝙡𝙮 𝙤𝙪𝙩𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙚𝙙 𝙤𝙩𝙝𝙚𝙧 𝙢𝙖𝙟𝙤𝙧 𝙢𝙖𝙧𝙠𝙚𝙩𝙨 (𝙀𝙐 𝙖𝙣𝙙 𝙅𝙖𝙥𝙖𝙣), 𝙥𝙡𝙪𝙨 𝙂𝙧𝙤𝙬𝙝𝙩 𝙠𝙚𝙥𝙩 𝙢𝙖𝙠𝙞𝙣𝙜 𝙞𝙩𝙨 𝙘𝙤𝙢𝙚𝙗𝙖𝙘𝙠 𝙫𝙨. 𝙑𝙖𝙡𝙪𝙚. 𝙍𝙚𝙥𝙤𝙧𝙩𝙞𝙣𝙜 𝙨𝙚𝙖𝙨𝙤𝙣 𝙛𝙤𝙧 𝟭𝙌𝟮𝟭 𝙨𝙩𝙖𝙧𝙩𝙨 𝙣𝙚𝙭𝙩 𝙬𝙚𝙚𝙠, 𝙨𝙤 𝙩𝙝𝙚 𝙚𝙢𝙥𝙝𝙖𝙨𝙞𝙨 𝙨𝙝𝙤𝙪𝙡𝙙 𝙨𝙬𝙞𝙣𝙜 𝙛𝙧𝙤𝙢 𝙢𝙖𝙘𝙧𝙤 𝙩𝙤 𝙢𝙞𝙘𝙧𝙤.
The US treasury yield found their temporary level up here around 160-170bps and the market clearly has alrady digested the new level of risk-free rates. Going forward all will depend on the dynamics of long-term interest rates changes. My feeling is that the market has clearly overstated the move higher in inflation expectations. Vast majority of the rise in CPI in the next months will come from $OIL . The rise now in gasoline ideally overlaps last years plunge due to Covid-19. So the YoY dynamics will be big positive, impacting CPI, but (and there’s always a but) other components of CPI are far from showing that much upside pressure as oil does. This, i think, is the answer to why the Fed is soooo easy on not changing policy message it sends to the market.
Let’s move on to the stories of last week…
𝗟𝗮𝘀𝘁 𝘄𝗲𝗲𝗸
👉 Roaring stocks and new records for US indices opened the week on Monday. Hi-tech stocks led the gains from the very start. Amazon, Google, FB, etc all rallied nicely. Equities were boosted additionaly by the latest ISM Non-Manufacturing Index read from Friday the week before, which hit at 63,7 for March, highest level in history.
👉 Vaccinations rate in US keeps making new records, which additionally supports the reopening story. Joe Biden’s multitrillion dollar infrastructure program is still widealy talked about as a big positive for the recovery of the US economy.
👉 Tuesday and Wednesday showed much lower changes in the indices, as the market seems to have switched to a wait-and-see mode ahead of the reporting season. On Wednesday the Fed minutes confirmed that the bank wants to stick to its super-easy monetary policy as the economy moves form recession into recovery.
👉 $SPX500 notched another record on Thursday led by Growth stocks. And so did it on Friday too.
👉 “Global equity funds saw $569 billion in inflows since November, more than the $452 billion going back to the beginning of the 2009-20 bull market run, according to Bank of America. That has come amid a 26% rise in the Dow Jones Industrial Average and 40% increase in trading volume for the first quarter of 2021 compared to the final three months of 2020.” (source: CNBC). 🤔 – not sustainable for sure, but as long as the rates anywhere you look around are literally ZERO, what’s the other choice???
👉 Now going forward the concentration is on clearly on earnings. The market consensus is for a 24,2% YoY rise in EPS. Next week we’ll get some big banks hitting the tape like $JPM (JPMorgan Chase & Co) and $GS (Goldman Sachs Group Inc) .
👉 𝙀𝙛𝙛𝙚𝙘𝙩𝙞𝙫𝙚 𝙬𝙚𝙚𝙠𝙡𝙮 𝙞𝙣𝙙𝙚𝙭 𝙘𝙝𝙖𝙣𝙜𝙚𝙨: $SPX500 +2,7%, $NSDQ100 +3,1%, EuroStoxx600 +1,2%, GER30 +0,8%, JPN225 -0,3%.
𝗢𝘁𝗵𝗲𝗿 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗲𝘃𝗲𝗻𝘁𝘀:
👉 𝘽𝙤𝙣𝙙𝙨: the US yield curve (10y-FF) narrowed to 157bps, the German curve (10Y Bunds-3M) at 31bps. EuroArea AAA-rated bonds yield curve wider again at 30bps. High Yield Spreads at 3,2.
👉 𝘾𝙤𝙢𝙢𝙤𝙙𝙞𝙩𝙞𝙚𝙨 (𝙚𝙭 𝙤𝙞𝙡): GOLD +0,8%
👉 𝙊𝙞𝙡: -3,1% on week.
👉 𝘾𝙪𝙧𝙧𝙚𝙣𝙘𝙞𝙚𝙨: DXY (Dollar Index) +0,9% on week, EURUSD +1,2%.
Best, GlobalAlphaS
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