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Market Commentary

March Monthly Market Commentary

A Looming Economic Heat Wave


Spring has sprung, and the season of hope is resonating throughout the economy. After suffering a 3.5 percent contraction in 2020 – the steepest since demobilization in 1946 – real GDP is poised to surge as much as seven percent this year, which would rival the biggest annual gains since World War Ⅱ. The widely dismissed V-shaped recovery that most economists thought would not follow last year’s dispiriting pandemic recession is well underway. Indeed, the economy is on track to make up all of the output losses by this summer – six quarters from the prepandemic peak in GDP. That would be remarkably fast compared to the last recovery, when it took 14 quarters for GDP to recover all of its recession losses.

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February Monthly Market Commentary

Policies Go Big


The bleak economic landscape that prevailed in the closing months of 2020 has not faded from the collective memory of the American public. With the pandemic still claiming too many lives and the economy still reeling from business restrictions and virus fears that hamper normal behavior, the lingering effects cannot be ignored. Yet as the curtain rises on 2021, green shoots are appearing on a number of fronts and will soon take center stage. Act 1 is the tremendous progress taking place on the vaccine rollout, which is now inoculating more than 1.5 million Americans a day and is set to accelerate markedly over the next few months. Herd immunity by the summer now looms as a real possibility, which would be the first step towards bringing the nation’s economy back to health.

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Weekly Market Commentary

April 19, 2021


The first quarter ended with a bang, and the drumbeat of positive economic news should continue to reverberate throughout the spring and summer months. Last week it was the employment report, which featured an astonishing gain of nearly one million jobs in March. This week’s highlight was the retail sales report that showed consumers went on a much stronger spending binge than anyone expected during the month. In the wake of these blockbuster outcomes, as well as a robust report on housing activity, further improvement on the labor front and a rebound in factory output, the opening chapter of 2021 is looking far more vigorous than thought a month or two ago.

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Weekly Market Commentary

April 12, 2021


The fire under economy’s growth engine has been ignited and the flames should burn brightly for months to come. By the end of this week, the IRS will have distributed nearly $400 billion of stimulus checks to 156 million Americans as part of the $1.9 trillion American Rescue Plan enacted last month. That’s quite a match, which should keep the embers of consumer spending hot through the spring and summer season and underpin a double-digit growth rate in GDP during the second quarter. The harsh winter storms that dented economic activity in February are fast becoming a memory as brighter skies are lighting up the economic landscape.

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Weekly Market Commentary

April 5, 2021


Most of us remember the quote from the Obama administration during the Great Recession, but it was actually Sir Winston Churchill who first said, “Never let a good crisis go to waste.” The phrase has not yet been reused by the Biden administration, but its spirit is clearly being honored. Following up on February’s $1.9 trillion American Rescue plan, the White House is pursuing one of the most ambitious spending initiatives since the 1950s with its $2.3 trillion infrastructure bill (dubbed the American Jobs Plan) announced this week. Although the bill is not specifically linked to the pandemic, by exposing the nation’s many vulnerabilities, the health crisis has no doubt made Americans more amenable to a greater amount of government intervention than would otherwise be the case. While the focus this time is infrastructure, the administration is prepping for another sizeable trillion dollar plus plan aimed at addressing the more socially oriented issues in the nation.

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Weekly Market Commentary

March 29, 2021


Separating signal from noise is always a difficult challenge for economists and policymakers, and that task becomes ever more complicated when unusual weather intrudes. That was clearly the case in February. According to the National Weather Service, the month was the coldest in the U.S. since 1989, with temperatures averaging 5-10 degrees below normal. A polar vortex, record snowstorms in the Northeast as well as the South and a deadly tornado in North Carolina were among other notable weather extremes that buffeted the nation in February. Needless to say, when climactic conditions turn as unruly as was the case last month, the economy is invariably affected.

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Weekly Market Commentary

March 22, 2021


For years following the inflationary spiral of the 1970s, the Federal Reserve’s biggest challenge was to convince the public and financial markets of its inflation-fighting credibility. The journey to success was long and painful, starting with a harsh growth-stifling turn of the credit screws by the Volcker-led Fed in the late 1970s and early 1980s, which sent the economy into a deep recession but broke the back of the inflation spiral. That initial breakthrough enabled subsequent Fed regimes to take less extreme measures to control inflation. But to establish and maintain credibility they felt the need to preemptively act to nip inflation in the bud when underlying conditions, such as low unemployment, pointed to a pick-up in price pressures. By the early 2000s, however, the Fed could safely exclaim “mission accomplished;” not only had it brought inflation down to levels last seen in the 1960s, but it thoroughly anchored inflation expectations, convincing households and the financial markets that it would forever keep the inflation genie bottled up.

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Weekly Market Commentary

March 15, 2021


The inflation story got a bit more complicated this week, amplifying the cognitive dissonance resonating through the financial markets. Bond investors, the most visible protagonists behind the increase in inflationary expectations, continued to nudge yields higher, with the bellwether 10-year note yield (at 1.63 percent) reaching the highest level in over a year at week’s end. Meanwhile, hard inflation data have yet to validate heightened inflation expectations in the market. Aside from surging energy prices, consumer price inflation was relatively tame in February, as price increases for most goods and services remained well within the ranges seen in recent years. The core consumer price index edged up by a slim 0.1 percent in February and the increase over the past year actually slipped from 1.4 percent to 1.3 percent.

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Weekly Market Commentary

March 8, 2021


The financial markets continue to sound a downbeat note, sending stock and bond prices tumbling and spurring a quest for answers by investors. Only a strong rally on Friday kept the S&P 500 index from retreating for the third consecutive week, which would have matched the longest losing streak since last September. As it is, the setback over the previous two weeks left the index just 2.3 percent above the level at the start of the year, erasing more than half of the 4.8 percent gain registered over the first six weeks. As dispiriting as that is to stock investors, the pain has been more acutely felt in the bond market. There, yields have climbed steadily since the start of the year, tacking on more than a half-percent to the 10-year Treasury note by the end of this week. At 1.56 percent, this bellwether yield is more than three times higher than its historic low reached last August.

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Weekly Market Commentary

March 1, 2021


Once again, we are reminded that the markets do not travel a straight line up. Stocks underwent a brutal tumble this week, the first back-to-back weekly decline in the S&P 500 index in four months. Not surprisingly, many are wondering if the party is over, even though the Federal Reserve has no intention of taking away the punch bowl. Time will tell, as only the most brazen soothsayers are convinced they know which way the market is heading. That said, there is no shortage of explanations regarding why stocks took it on the chin this week, including the usual suspects – stocks are overvalued and primed for a fall, inflation is rearing its ugly head, and, most notably in recent weeks, spiking bond yields are eating the lunch of stock investors.

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