ECONOMIC DATA WATCH AND MARKET OUTLOOK
The S&P 500 (-0.6% ) and NASDAQ Composite (1.3%) were mixed last week. Growth stocks resumed their upward momentum later in the week to finished positively for the week, up 1.4% according to the Russell 1000 Growth. Values stocks lost steam from the previous week and declined 2.8% according to the Russell 1000 Value.
In turning to the coming week’s economic calendar, this will be a big week for unemployment numbers. A series of reports will be released with ADP results due on Wednesday, Jobless Claims on Thursday, and Non-Farm payrolls due Friday. Consumer data will also be released with Consumer Confidence released on Tuesday, and Personal Income and Consumer Spending released on Thursday as investors and traders are paying close attention to stimulus developments and changes in the data and its correlation with past stimulus efforts.
THE WEEK IN REVIEW EQUITIES
US equity markets fell for a fourth consecutive week as fiscal stimulus talks remain in neutral and the Fed stated the US economic recovery from the COVID-19 pandemic could be a long one.
- S&P 500 Week -0.60%, MTD -5.66% , YTD +3.53%
- Russell 2000 Week – 4.01, MTD -5.48% %, YTD -10.71%
- MSCI EAFE Week -4.21%, MTD -4.06%, YTD -8.48%
- MSCI EM Week – 4.42%, MTD -3.72%, YTD -3.29
Drivers:
I) Investors continue to monitor the impact of COVID 19 on the economy, and how the technology has pushed society to work and live differently. Those companies that continue to leverage technology and have can do more with less will continue to thrive.
II) The Fed maintains that they will continue to keep rates low until at least 2023 but Chairman Powell and Treasury Secretary both acknowledged that additional Fiscal Stimulus is necessary.
III) Containing the spread of Covid 19 continues to be a challenge as the rush for a vaccine continues. US death tolls surpassed the 200,000 mark while cases have seen a resurgence in Europe. Weariness due to social distancing is paling a role. A recent study out of the UK notes that 80% of people who have symptoms or have had contact with someone who has are not adhering to social distancing guidelines.
FIXED INCOME
As of this writing, the fixed income markets remain stable with benchmark Treasury yields unchanged from the very low levels reached during the end of Q1 ‘20. The three-month Treasury Bill at .13% and ten year Treasury bond at .67 continue to reflect the Federal Reserve’s determination to keep rates low for the foreseeable future.
Corporate bond, asset backed, and mortgage bond spreads narrowed slightly during the week but remain in a narrow range for the most part reflecting stabilization achieved post Central Bank intervention during the early days of the COVID crisis.
We continue to believe that excess returns in the fixed income markets will be earned by managing credit spreads in various sectors of the bond market as opportunities in different segments present themselves.