By: Ariel Segal
Strong economic data last week including durable goods orders, new home sales, wholesale inventories, and lower than expected initial jobless claims were contributors to the elevated concerns of inflation seen through the recent volatility in Treasuries. The increasing Fed Q1 GDP forecast also played a large role. The month-to-date increase in 10Y Treasury yields is 40bps.
The House passed President Biden’s $1.9 trillion stimulus package on Saturday. The Senate will most likely amend pieces of the plan, but democrats hope to have it signed by March 14th at the latest as jobless benefits are set to expire.
Johnson & Johnson’s Covid-19 vaccine was authorized by the FDA on Saturday. J&J plans to deliver 3.9 million doses of its vaccine in the next day or two. Unlike the other vaccines currently available, it is a one-shot vaccine that does not need to be kept in a freezer. 241 million vaccine doses have been given worldwide, with 81 million of those being given in the U.S.
Fixed Income Market:
By Joseph Colleran
Last week can be summed up with one word: “volatility”. We saw a spasmodic spike and then reversal in both USTs and corporate bond spreads. The UST 10yr briefly touched 1.60% before reversing a full 20 basis points. This morning we sit at 1.45% which is almost the exact level we began last week. During this UST gyration we saw IG spreads widen as much as 10 basis points in some sectors before quickly retracing too unchanged. So despite the relatively mundane week-over- week numbers, it was a chaotic time in the fixed income markets. We saw another strong series of economic releases that point to a continuation of the reflation trade, and again, the energy continued as the best performing sector. Overall, HY bonds continue to hover at historically low yields and IG spreads remain near their all-time “tights” versus USTs.
Despite the week’s volatility there remained one constant – LISI retail clients continue to show a strong appetite for Structured Notes. February ended with another impressive showing in this important investment class.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $1.2BLN
IG Bond Funds up $4.2 BLN
HY Bond Funds down $2.2BLN
Municipal Bond Funds up $0.4BLN
Domestic Equity Funds down $0.9 BLN
IG Bond Funds up $4.5 BLN
HY Bond Funds down $1.3 BLN
Municipal Bond Funds up $1.6 BLN
By: James Zurovchak
Inflation fears ruled last week as US Treasuries plunged on the heels of the worst 7yr auction on record. Heavy profit taking moved all three major indices lower. NASDAQ led the way with a drop of 4.9%. S&P 500 and DJI were down 2.4% and 1.7% respectively. Despite the rough week, all three majors finished up for the month and are still posting modest gains year to date. 10 of 11 GICS sectors were down on the week with Energy (+4.3%) being the sole gainer. Financials (-0.3%) and Industrials (-0.4%) outperformed as well. Consumer Discretionary (-5.0%), Utilities (-5.0%) and Communication Services (-4.3%) lead the way down. Value significantly outperformed Growth -1.0% vs -4.4%. Small Caps gave back some ground to the majors losing 2.9%. The same themes will remain front and center this week as investors eye the yield curve. The Fed continues to try and jawbone long term rates lower and can act if needed. It remains to be seen if and when they do. Biden’s $1.9T stimulus plan moves to the Senate and JNJ rolls out its newly approved vaccine.
By Anthony Minardo
The dollar continues to flourish as we begin trading in March. US yields exploded higher and briefly traded above 1.6% as the market has become very optimistic about the economic recovery, as increasing vaccinations has the U.S. moving closer towards the new normal. This week will be quite busy with numerous speeches from Fed members, along with and abundance of economic data including February’s PMI, ISM, factory orders and ending the week with the employment report. The US dollar will be very susceptible to the outcome of the aforementioned events.
By Brian Stigliano
Why Work with a Financial Advisor?
As discussed in last week’s article, the Biden administration is seeking to reduce the estate tax exemption amount. Potential changes such as these often lead to the question of why someone should work with a financial advisor as opposed to doing things on his or her own. I often direct the person asking the question to “Vanguard Advisor’s Alpha” study. Despite being largely marketed as a “do it yourself” index investing firm, Vanguard has shown that working with a financial advisor typically adds approximately three percent per year to one’s returns. This is largely due to the following:
- Advisors help clients develop and manage investment portfolios that are designed to achieve their goals by having the appropriate level of risk and being as tax efficient as possible.
- Advisors help clients remain committed to their long-term plans and not fall victim to the behavioral pitfalls that impact making sound financial decisions.
- Advisors help clients keep a view of the big picture with customized plans including retirement planning, estate planning, and charitable giving.
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