A Bifurcated Recovery, More Evidence of Approaching Inflation, and Revisiting Millennium-Era Trends
February 5, 2021 | FIRESIDE CHARTS
The service sector recovery looks to be gaining some traction and outperformed expectations, though significant bifurcation remains as “the Covid factor” continues to exert its influence. Also still exerting influence? The Reddit crowd. Though attention has shifted from GameStop as prices slowly normalize, overall, the market is becoming more and more reminiscent of 1999. Should we be bracing ourselves for the fallout? A look back at the S&P 500® Index performance gap and U.S. margin debt present some convincing evidence…
1. Overall, services have rebounded to the highest levels in years. This recovery, however, is bifurcated by the “Covid factor“…
Source: IHS Market, from 2/4/21
2. Here is an example of the bifurcation:
Source: The Daily Shot, from 2/4/21
3. As we continue our inflation watch, even if/before the doubling of the minimum wage is accomplished in D.C., the cost of labor is rising…
Source: The Daily Shot, from 2/5/21
4. U.S. homeowners continue to improve their balance sheets by refinancing. This should help them weather any future economic storms as they enjoy the cheapest mortgage rates in history…
Source: The Daily Shot, from 2/4/21
5. We heard from some small investors how “unfair” the cessation/limitation of trading on these stocks was. BD solvency issues aside, how many small investors got hurt by buying at or near the peaks? “Pump and dump” schemes have been around for a long time, and the regulators are gathering data to try to protect these small investors…
Source: The Daily Shot, from 2/5/21
6. Confirmation that many are just inexperienced and following the herd. These folks tend to get hurt the most when the music stops…
Source: The Daily Shot, from 2/4/21
7. It looks, feels and probably is like 1999. Over time, fundamentals do matter. What will be the trigger, the Reddit crowd?
Source: The Daily Shot, from 2/4/21
8. The oil shock and Y2K were the first two triggers under these extremes…
Source: The Daily Shot, from 2/4/21
9. Another concern? Note the recession followed the first two; are we in for a double dip?
Source: The Daily Shot, from 2/4/21
10. European inflation is picking up, but ~1% is hardly considered inflationary or worrisome. Let’s keep an eye on the trend!
Source: The Daily Shot, from 2/4/21
11. As we continue our inflation watch, even if/before the doubling of the minimum wage is accomplished in D.C., the cost of labor are rising…
Source: The Daily Shot, from 2/5/21
12. Another reminder that duration is increasing in the bond index. If you own funds/ETFs that follow the BBAB Index, risk to rising rates is increasing…
Source: The Daily Shot, from 2/5/21
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.