For most of you living in the Americas remember to move your clocks forward one hour on Sunday as Day Light Savings time begins. Enjoy the longer days as Spring is right around the corner. Enjoy my view on the current market price action and where to from here.
WEEKLY SOUND BITES
• Major indexes moved broadly higher this week, lifting most of the major benchmarks to new records…This week, $1.9 trillion more dollars are being injected into the economy, which is likely to course its way through the real economy and the capital markets…All told, the government has spent nearly $5 trillion in an effort to keep the economy moving, which is probably about double what was actually needed, in our opinion…Nevertheless, economists expect the latest round of stimulus – and the money that came before it – to generate the fastest annual GDP growth the U.S. has seen since 1983. The notion of 5+% GDP growth in 2021 is not farfetched…
• Much of the rest of the week’s economic data were arguably upbeat…Initial weekly jobless claims fell to 712,000, the lowest level since November—although, as some pointed out, this was still above the highest level reached during the Great Recession of 2007–2009…Continuing claims fell to 4.1 million, below expectations and the lowest level in a year…The gradually healing labor market seemed to be reflected in the University of Michigan’s preliminary gauge of consumer sentiment in March, which rose more than expected and hit a new pandemic-era high of 83—up from a low of 73.5 last April but still well below the pre-pandemic level of 101 in February 2020.
• When Treasury bond yields are pressured higher, the prices of the bonds fall – hence characterizing it as a “sell-off”…The benchmark 10-year U.S. Treasury note started the year under 1% and is now trading above 1.5%, a move many believe is tied to the expectations of an economic recovery and possibly higher inflation in the coming months and years…Because of the trillions of dollars being spent by the federal government during the pandemic, they are issuing debt (Treasury bonds) at a breakneck pace…As we know from macroeconomics 101, when supply goes up quickly, prices tend to fall. It follows that net new supply of 2- to 30-year U.S. Treasury bonds is on pace to reach $3 trillion this year, up from $1.7 trillion in 2020 and just $990 billion in 2019…Fed purchases of Treasuries are also going down, leaving the market with excess supply…now, let’s see how much demand exists to purchase all this excess supply…
• The ECB’s latest estimates call for EU GDP growth at 4% in 2021, an increase from the 3.9% expansion that the central bank forecast in December…The ECB also revised its inflation outlook to 1.5% from 1% for 2021 and adjusted its 2022 estimate to 1.2% from 1.1%…ECB President Christine “Queen Bee” Lagarde attributed these adjustments primarily to “temporary factors and higher energy price inflation.”
• Chinese stocks posted a weekly loss as the Shanghai Composite Index as net inflows into Chinese stocks have turned neutral for the first time since November…On Thursday, China concluded its annual National People’s Congress (NPC) meeting, the country’s highest profile political gathering, at which lawmakers set economic targets and other economic policy. Days after unveiling China’s 2021 GDP growth target of above 6% that was widely viewed as conservative… Also, last month’s increase in PPI, was driven by price increases in energy, basic materials, and capital goods which shows creeping inflationary environment…
Enjoy This Week’s Round-Up;
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
