Weekly market wrap

Good economic news propelled stocks to new highs last week, with equities, bonds and commodities all rallying. The Dow surpassed 43,000 for the first time, as signs of 1) rising demand (consumer spending), 2) rising inflation and 3) rising earnings all point to an accelerating recovery. Improving trends in consumer spending and corporate earnings will be key factors in extending the durability of the new economic expansion and bull market, while inflation pressures can be problematic if they persist. We'd offer the following takeaways on whether the gains in these three areas can be sustained and what that implies for the markets.
Select retail-sales categories | % change in March from February | % change from pre-pandemic peak |
---|---|---|
Building Materials | 12% | 32% |
Motor Vehicles | 15% | 27% |
Clothing | 18% | 2% |
Restaurants & Bars | 13% | -5% |
Total Retail Sales | 10% | 17% |
Inflation pressures won't likely trigger Fed action unless they persist beyond 2021
Source: Core PCE YoY % change, Factset, Edward Jones
The graph shows inflation trends as measured by the personal consumption expenditures price index. Inflation is expected to accelerate this year as demand recovers. Prices also jumped in 2011 but the inflation pressures quickly subsided as growth slowed.
Market implications:
We believe economic and corporate fundamentals will continue to improve beyond the coming quarter and year, but the rate of change will slow. The upcoming transition from recovery to expansion implies that we remain in the favorable part of the business and market cycles. However, equity returns are likely to moderate, and pullbacks are likely to become more frequent, consistent with midcycle conditions. A short-lived inflation scare will not be enough to shift the Fed's view, but price pressures that persist is a medium-term risk worth monitoring.
Angelo Kourkafas, CFA
Investment Strategist
Sources:
1. Bloomberg
2. FactSet, based on earnings from JP Morgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), US Bank (USB), Truist Financial CorpTFC, Goldman Sachs (GS),Citi Bank (C), FRC, Morgan Stanley (MS), PNC, State Street Corp STT, Citizens Financial Group (CFG), Bank of New York Mellon (BK)
3. FactSet, Edward Jones calculations
INDEX | CLOSE | WEEK | YTD |
---|---|---|---|
Dow Jones Industrial Average | 34,201 | 1.2% | 11.7% |
S&P 500 Index | 4,185 | 1.4% | 11.4% |
NASDAQ | 14,052 | 1.1% | 9.0% |
MSCI EAFE | 2,285 | 1.0% | 6.4% |
10-yr Treasury Yield | 1.59% | -0.1% | 0.7% |
Oil ($/bbl) | $63.16 | 6.5% | 30.2% |
Bonds | $114.54 | 0.3% | -2.4% |
Source: Factset, 4/16/2021. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results. *4-day performance ending on Thursday.
Important economic data being released next week include the LEI index and the PMI composite.
The Weekly Market Update is published every Friday, after market close.
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