Equity Issuance Hits Record, Yields Drive More Unrest, and What a Rate Hike Could Mean for U.S. Debt
March 15, 2021 | FIRESIDE CHARTS
It’s been a record-setting quarter for new stock issuance as companies race to get in on the market action and SPACs continue to soar in popularity. The Dow and others hit new records last week—although not without some market chop—while tech stocks stumbled and small caps continue to climb. Yields also climbed amid ongoing inflation concerns, driving some of that outperformance and market unrest. A look at the 10-year UST’s long-term trendline though may help calm some yield anxieties. Gold edged higher this morning as markets digest the $1.9 trillion stimulus bill and we inch closer to this week’s Fed meeting, though it’s yet to see significant gains from climbing inflation expectations. And PPI gains did accelerate in February and could point to higher PCE inflation ahead. If interest rates climb though, what will it mean for the nation’s debt?
1. Driven by both SPACs and IPO’s, 1Q21 set a record for new stock issuance:
Source: The Daily Shot, 3/15/21
2. After years of lagging large-caps, inflation concerns have helped drive small-caps to impressive YTD gains:
Source: The Chart Store, 3/15/21
3. While most markets quietly hit new highs, there has been some digestive chop:
Source: The Chart Store, 3/15/21
4. Much of the stock market chop has been caused by rising interest rates as the UST ten year’s yield continues to surge:
Source: The Chart Store, 3/15/21
5. Yet a longer look back shows an over-extended bid and an intact long term trend:
Source: The Chart Store, 3/15/21
6. Gold, a traditional hedge against inflation, has struggled as interest rates rise:
Source: The Chart Store, 3/15/21
7. Crude has been using short-tern noise to defy gravity. Most U.S. shale becomes profitable around $45/barrel and WTI just passed $60/barrel. Expect U.S. production to kick in soon…
Source: The Chart Store, 3/15/21
8. Are commodities poised for a decade-long run similar to the last two rallies?
Source: The Daily Shot, 3/15/21
9. Will the PCE follow the PPI higher to the FED’s target of 2%?
Source: The Daily Shot, 3/15/21
10. For the Greeks and Romans, the beginning of the end for their Democracies was when the people elected politicians who would give them whatever they wanted knowing full well it was unaffordable long term…
Source: The Chart Store, 3/15/21
11. Near-zero rates have helped everyone with low interest costs, including the U.S. government. Yet if rates keep rising, the refinancing of existing debt will quickly change this:
Source: The Daily Shot, 3/15/21
12. This is not an idle problem for future budgets and spending:
Source: The Daily Shot, 3/15/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.