Services PMI Hits Highest on Record, a Labor Market Update, and is a QE Taper Approaching?
June 4, 2021 | FIRESIDE CHARTS
More good news from ISM this week: services PMI saw gains in every sector and climbed to its highest level on record in May—though again, not without a corresponding hike in prices. This morning’s jobs report shows that the U.S. added 559,000 jobs in May and the unemployment rate ticked down to 5.8%, falling short of expectations as many sectors are still struggling to attract workers in the midst of reawakened consumer demand. Over in the equity markets, this last year has seen a dramatic reversal of trend when it comes to equal-weight vs. cap-weighted performance, and energy and metals companies continue to trade at a significant discount to the S&P 500® Index, despite recent gains. Will the trend continue as inflation remains near top-of-mind for investors? And hints have started appearing that the Fed may begin easing off the stimulus gas, but what will the taper look like?
1. Similar to the manufacturing PMI, the services PMI is at multi-decade highs:
Source: IHS Markit, from 6/4/21
2. Great news for restauranters! Business has now fully recovered:
Source: The Daily Shot, from 6/3/21
3. Is Washington and/or the Fed paying attention?
Source: The Daily Shot, from 6/3/21
4. In a remarkable shift, equal weight S&P 500 sectors have all outperformed their cap-weighted brethren over the last year:
Source: S&P Dow Jones Indices, from 5/28/21
5. After more than a decade of “no love”, will the markets continue to embrace these undervalued industries?
Source: S&P, MSCI, Moodys and GMO, as of 3/31/21
6. What is the “normal” interest rate for the 10-year UST?
Source: Barclays Research, from 6/4/21
7. The opening salvo of QE tapering?
Source: Wall Street Journal, from 6/3/21
8. Future Fed tapering is likely to be stealthy; they will just let bonds they own mature and simply not buy replacements. But who will buy the replacements?
Source: New York Fed, from 6/4/21
9. The ADP jobs report, often off the mark, indicated another very strong payroll report. Thus renewed talk of Fed tapering earlier, higher rates, and a stronger dollar. All part of the long-term wrestling match as the markets prepare for the inevitable…
Source: Bloomberg, from 6/4/21
10. It seems Europe is following the U.S. economy with most measures just a few months behind:
Source: IHS Markit, from 6/3/21
11. Europe is also seeing PPI inflation:
Source: The Daily Shot, from 6/3/21
12. The vaccines are winning in the fight against Covid. Please join the winning team!
Source: Center for Disease Control and Prevention, as of 6/1/21
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.