Markets, Economy

Weekly Kickstart (03/15/2021-03/19/2021)

3/15/21 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 2.64 percent to 3,943.34. That was a new all-time closing high and it left the benchmark index up 4.99 percent 2021-to-date. The market rebound was broad and most major equity indices are now closer to their record high than the correction low from earlier this month. Even better, an updated report from the Federal Reserve suggests that a growing number of Americans are benefiting from the resilient stock market. Specifically, the latest Flow of Funds data for Q4 2020 showed that the value of equity market assets held by U.S. households has climbed to 16.8 percent as a share of total assets, the highest reading since Q3 1969 and even surpassing the 16.7 percent peak of the tech bubble. Further, when compared to just financial assets equity exposure is now at the highest level recorded in two decades, and if we also account for mutual funds and other indirect exposure to equities, U.S. households’ stock market exposure relative to other financial assets climbed to 38.0 percent in Q4 2020. That is fractionally below the tech bubble high of 38.3 percent, and this broader measure of equity exposure as a percentage of all assets is already at a new record.

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Altogether Americans are clearly more exposed to stocks than they have been in a very long time. This can obviously be viewed as a contrarian indicator, but there is also no necessary reason why both stock valuations and the share of equity ownership cannot continue to rise further. In fact, a potential upward catalyst for such figures could come from the latest fiscal package to make its way through Congress. Indeed, last week we noted that a new Bank of America survey found that a majority of Americans across all income groups said that rather than using the incoming $1400 relief payment for discretionary spending, they instead plan to use the funds to save, pay off debts, or invest. This would mirror the behavior observed during the previous two rounds of pandemic-related transfer payments from the government, and the investment option may play a bigger role this time considering how much household balance sheets have already improved. Similarly, a recent Deutsche Bank poll found that retail investors intend to put roughly a third of any forthcoming stimulus to work in the stock market this year. Tax refund season is also getting underway, which means even more retail money could soon flow into equities. None of this means stocks will continue to go straight up, especially if the rise in Treasury yields accelerates, but it does mean a lot of new, inexperienced investors will be participating in the markets. Some of these individuals may only be interested in short-term speculation, while others intend to begin a long-term investing journey. Both are likely to benefit from working with a professional financial advisor, and always we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that mortgage applications rose, total job openings climbed to a crisis high, the number of out-of-work Americans per job vacancy fell to a 10-month low, a key gauge of labor market confidence improved, consumer optimism rebounded, small business owner sentiment stabilized, and gauges of core consumer inflation came in below analysts’ forecasts. As for the negatives, the hiring rate moderated, gasoline prices rose for the 15th consecutive week, and the number of people making first-time claims for unemployment benefits remained alarmingly high. This week the pace of economic data picks up slightly with a few important reports on housing, manufacturing, and consumers scheduled to be released, along with a potentially market-moving monetary policy announcement from the FOMC on Wednesday.

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What To Watch:

Monday

  • 3-Yr Note Settlement
  • 10-Yr Note Settlement
  • 30-Yr Bond Settlement
  • Empire State Manufacturing Index 8:30 AM ET

Tuesday

  • FOMC Meeting Begins
  • Retail Sales 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Business Inventories 10:00 AM ET
  • Housing Market Index 10:00 AM ET
  • 20-Yr Bond Auction 1:00 PM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • Housing Starts and Permits 8:30 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • FOMC Announcement 2:00 PM ET
  • Fed Chair Press Conference 2:30 PM ET

Thursday

  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Manufacturing Index 8:30 AM ET
  • Leading Indicators 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 2-Yr Note Announcement 11:00 AM ET
  • 5-Yr Note Announcement 11:00 AM ET
  • 7-Yr Note Announcement 11:00 AM ET
  • 10-Yr TIPS Auction 1:00 PM ET

Friday

  • Quadruple Witching
  • Baker Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, FRBG, BIG, BAML, DB, FRBSL

Post author: Charles Couch

Disclosures