Markets, Economy

Weekly Kickstart (03/01/2021-03/05/2021)

3/1/21 8:00 AM

iStock-626627280.jpgStocks were under pressure last week, as the S&P 500 fell by 2.45 percent to 3,811.15. That still left the benchmark index up 1.47 percent 2021-to-date, and just 3.14 percent below the all-time closing high. Despite the pullback in the second half of February the S&P 500 still managed to end the month up 2.61 percent. That is a welcome reversal from the 1.11 percent decline seen in January and significantly better compared to February’s historical performance. Looking ahead, the S&P 500 since 1929 has risen 60 percent of the time in March, and on average finished the month with a gain of 0.43 percent. Things look even better in April, which has seen the broad index rise two-thirds of the time since 1929 and return on average 1.28 percent. However, if we only consider occasions when the S&P 500 posted a gain in February as strong as what we just experienced then the near-term seasonality flips negative.

y783y54785

Specifically, following a similarly strong February the S&P 500 on average fell by 0.92 percent in March, and 2.40 percent through the end of May. Of course past performance does not guarantee future returns, but even with the potential for weaker near-term price action it is important to remember that corrections, and more generally, volatility, are normal occurrences in capital markets. In fact, over the past four decades the S&P 500 has experienced an average intra-year peak-to-trough decline of 14.3 percent but still managed to finish the year positive 75 percent of the time. This is not news to experienced 401(k) investors (and long-term blog readers) who know to look past these potential day-to-day swings in stock prices and remain focused on the long-term objective of preparing for retirement through years of routine, tax-advantaged plan contributions. As for those investors less comfortable navigating such an environment, consider using market rallies as opportunities to review your positioning and make sure it is properly aligned with your risk tolerance, nearness to retirement, and other unique variables. These periodic reviews can help identify potential portfolio imbalances ahead of time rather than waiting until the market has already moved against you and your options feel much more limited. As always, we are here to help with any questions you may have.

543yy34545

To recap a few of the things we learned about the economy last week, the positives included that new home sales jumped, home price appreciation broadened, regional manufacturing gauges firmed, Q4 2020 U.S. GDP growth was revised slightly higher, consumer spending exceeded forecasts, the personal savings rate surged, and Americans’ incomes increased markedly (albeit due mainly to the recent $600 relief checks). As for the negatives, mortgage applications plunged, pending home sales unexpectedly declined, demand for U.S. made durable goods came in weaker than projected, a key measure of business investment cooled, the Fed’s preferred inflation gauge ticked higher, consumer confidence held well below pre-COVID levels, and the number of Americans making first-time claims for unemployment benefits remained alarmingly high. This week the pace of economic data picks up with a few important reports on manufacturing, service sector activity, productivity, small business, and employment scheduled to be released, along with a handful of potentially market-moving speeches from Federal Reserve officials.

45y3y35445

What To Watch:

Monday

  • 2-Yr Note Settlement
  • 5-Yr Note Settlement
  • 7-Yr Note Settlement
  • 20-Yr Bond Settlement
  • John Williams Speaks 9:00 AM ET
  • Lael Brainard Speaks 9:05 AM ET
  • PMI Manufacturing Final 9:45 AM ET
  • ISM Manufacturing Index 10:00 AM ET
  • Construction Spending 10:00 AM ET
  • Raphael Bostic Speaks 2:00 PM ET

Tuesday

  • Lael Brainard Speaks 1:00 PM ET
  • Mary Daly Speaks 2:00 PM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • ADP Employment Report 8:15 AM ET
  • PMI Composite Final 9:45 AM ET
  • Patrick Harker Speaks 10:00 AM ET
  • ISM Services Index 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Raphael Bostic Speaks 12:00 PM ET
  • Charles Evans Speaks 1:00 PM ET
  • Beige Book 2:00 PM ET
  • Robert Kaplan Speaks 6:05 PM ET

Thursday

  • Challenger Job-Cut Report 7:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • Factory Orders 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 3-Yr Note Announcement 11:00 AM ET
  • 10-Yr Note Announcement 11:00 AM ET
  • 30-Yr Bond Announcement 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • Employment Situation 8:30 AM ET
  • International Trade in Goods and Services 8:30 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
  • Raphael Bostic Speaks 3:00 PM ET
  • Consumer Credit 3:00 PM ET
 

 

Sources: Econoday, J.P. Morgan, FRBSL

Post author: Charles Couch

Disclosures