Capital Markets Weekly Update - Leumi USA

Capital Markets Weekly Update

Macro Commentary: 

By: Ariel Segal

Nonfarm payrolls beat estimates on Friday, increasing by 379k, reflecting a surge in leisure and hospitality employment. The re-opening of services will be a significant driving factor in the coming months for payroll numbers. Factory orders also beat estimates last week. CPI on Wednesday and PPI on Friday will be closely watched as increasing inflation expectations have much of the fixed-income market on edge.

The Senate passed President Biden’s $1.9 trillion package on Saturday after making a few changes to the bill, including dropping the proposed minimum wage increase. The bill is expected to pass easily in the house once taken up on Tuesday.

The CDC has released guidance for what vaccinated people can do safely, saying that they can visit indoors without masks, but still must wear them in public when around those who are not immunized. More than 304 million vaccine doses have been given worldwide, with 95 million of those being given in the U.S.

Fixed Income Market:

By Joseph Colleran

The upheaval in the credit markets which began early last week continues with a second week of spread widening and general risk aversion.   WoW we have seen IG spreads widen by another 3-5 basis points while HY prices are down, on average, by a point.  In the face of this, IG new issuance continues at a very high pace.  Last week saw $65 BLN come to market and this week we are forecasting a similar number.   UST 10yr yields have resumed their march higher and once again are touching 1.60% which was last seen over one year ago prior to the onset of the pandemic.   Economic releases continue to surprise to the upside as further signs of recovery are being reflected by a growing number of sectors.   

For the second consecutive week we are seeing little retail demand for traditional corporates.  Most of our activity remains focused on new issue Structured Notes which continues as the preferred source of yield for our retail clients. 

Lipper Fund flow data for the week showed:    

      Domestic Equity Funds     down    $2.5BLN

      IG Bond Funds                     up        $5.2 BLN

      HY Bond Funds                    up        $0.6BLN 

      Municipal Bond Funds     down    $0.8BLN

Prior Week:

     Domestic Equity Funds      down    $1.2 BLN

      IG Bond Funds                    up        $4.2 BLN

      HY Bond Funds                   down   $2.2 BLN 

      Municipal Bond Funds      up        $0.4 BLN

U.S Equities:

By: James Zurovchak

Volatility was the name of the game last week with NASDAQ suffering an 8+% loss sandwiched between two up days to close the week down 2.0%.  DJI and S&P500 fared much better finishing up 1.9% and 0.8% respectively.  Rising US Treasury yields continued to put pressure on growth stock valuations spurring another round of profit taking that has NASDAQ now almost flat for the year. 7 of 11 GICS sectors were up on the week with Energy (+10.0%), Financials (+4.3%) and Industrials (+3.1%) continuing to be the darlings of the rotation.   Consumer Discretionary (-2.7%), Communication Services (-1.9%) and Technology (-1.3%) were the worst performers.  Not surprisingly, Value again significantly outperformed Growth +2.6% vs -1.8%.  Small Caps followed in sympathy with NASDAQ, losing 0.3% on the week.  With a $1.9T stimulus package passed by the Senate and set for House approval early this week, the battle between inflation fears and solid economic recovery/reopening will continue.  Expect another volatile week.  

Foreign Exchange:

By Anthony Minardo

It took almost a year, but the US dollar has awoken.  Last Friday’s non-farm payroll data outperformed at 379k beating expectations of 180k; providing the markets a clear indication that the U.S. economy is recovering as vaccinations continue to be available and the $1.9 trillion stimulus package will be signed. However, the most indicative reason for the recent dollar strength continues to be the rise in US Treasury yields which are currently trading above 1.5%. 

There continues to be skepticism if the current move in the dollar is just a short squeeze or is this the start of a reversal in the trend of the dollar, as the fundamentals have shifted over the past few weeks.  The market continues to believe it is the latter, as the Fed may need to raise rates sooner than the current projection of 2023.  The US dollar begins the week stronger against the G-10 currencies, as interest rate differentials are widening.  Next week’s FOMC meeting on March 17th should be the next major event which could give us more clarity on “reinflation” and the path of the Fed.

Financial Planning:

By Brian Stigliano 

Growth Investing or Value Investing?

Ford vs Chevy, Ohio State vs Michigan, and Yankees vs. Red Sox are some of the most well-known rivalries in American history.  In the world of stock investing, there is a similar rivalry between growth investors and value investors.  In general, growth stocks tend to be priced higher (as measured by price to earnings multiples), have strong earnings growth, and are more volatile, while value stocks tend to be priced lower than the market, priced lower than industry peers, and less volatile.  

Many investment analysts have recently been discussing whether the recent shift away from growth stocks into value stocks is a trend that will last.  Looking to the past, both the large cap growth index (S&P 500 Growth) and the large cap value index (S&P 500 Value) have enjoyed periods of outperformance since 2000.  Value largely outperformed growth in the early 2000s while growth has enjoyed more recent success according to data from the Callan Institute.  What may be most interesting is large cap growth’s outperformance during the recession in 2008 and the outperformance in 2020 during the COVID-19 crisis.  So, which are better for your stock allocation in a portfolio?  Like many answers to investment questions, the answer is likely a mix of both.

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IMPORTANT DISCLOSURES
The opinions voiced in this material, including without limitation the statistic information herein, are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. The economic or market analyses or forecasts in this material reflect the views of the individuals who prepared them and do not necessarily represent the position of Bank Leumi USA, Leumi Investment Services Inc. or of other units of the worldwide Leumi Group. The analyses and forecasts should not be construed as a recommendation to buy or sell, or the solicitation of an offer to buy or sell any securities, currencies, or financial instruments.

Bank Leumi USA, other units of the Leumi Group, or the individuals that prepared the analyses or forecasts may have positions in securities, currencies, or financial instruments that may be affected by action that is consistent with the analyses or forecasts. Any economic forecasts set forth in the presentation may not develop as predicted. The material is based in part on information from third-party sources that we believe to be reliable but which have not been independently verified by us, and for this reason we do not represent that the information is accurate or complete, and no liability is assumed for any direct or consequential losses arising from their use. Except where otherwise indicated herein, the information in this material is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA.  Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

•             Not insured by the FDIC or any other federal or government entity

•             Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

•             Subject to investment risks, including possible loss of the principal amount invested

© 2021 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.

Ariel Segal | Treasury Analyst
350 Madison Avenue, 4th floor | New York, NY 10017
Tel: 212.626.1199 | ariel.segal@leumiusa.com  

IMPORTANT DISCLOSURES

The opinions voiced in this material, including without limitation the statistic information herein, are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. The economic or market analyses or forecasts in this material reflect the views of the individuals who prepared them and do not necessarily represent the position of Bank Leumi USA, Leumi Investment Services Inc. or of other units of the worldwide Leumi Group. The analyses and forecasts should not be construed as a recommendation to buy or sell, or the solicitation of an offer to buy or sell any securities, currencies, or financial instruments.

Bank Leumi USA, other units of the Leumi Group, or the individuals that prepared the analyses or forecasts may have positions in securities, currencies, or financial instruments that may be affected by action that is consistent with the analyses or forecasts. Any economic forecasts set forth in the presentation may not develop as predicted. The material is based in part on information from third-party sources that we believe to be reliable but which have not been independently verified by us, and for this reason we do not represent that the information is accurate or complete, and no liability is assumed for any direct or consequential losses arising from their use. Except where otherwise indicated herein, the information in this material is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

Investing involves risk. Past performance is not a guarantee or a reliable indicator of future results. You should obtain relevant and specific professional advice before making any investment decision. All investors must carefully consider the risks, charges, fees, and expenses, review the prospectus or other offering information if applicable, and consider their personal financial situation and tolerance for risk before making any investment.

Bank Leumi USA is an FDIC Insured, New York State chartered bank. In the U.S., banking products and services are provided through Bank Leumi USA and brokerage products and services are provided by Leumi Investment Services Inc. Leumi Investment Services Inc. is a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and is a wholly-owned subsidiary of Bank Leumi USA. Certain products and services are not available to U.S. residents and/or are offered through third party providers.

Non-deposit investment products offered through Bank Leumi USA and Leumi Investment Services Inc. are:

• Not insured by the FDIC or any other federal or government entity

• Not guaranteed by Bank Leumi USA, Bank Leumi le-Israel, B.M., or any other bank

• Subject to investment risks, including possible loss of the principal amount invested

© 2019 Bank Leumi USA. Leumi, Leumi Investment Services Inc., and Bank Leumi USA are registered trademarks of Bank Leumi USA. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities.

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