Retail Sales Growth Hits 10-Month High, the Market Grows More Expensive, and Treasury Yields Slide
April 16, 2021 | FIRESIDE CHARTS
U.S. retail sales growth soared past expectations in March, climbing to 9.8% MoM—and a record 27.7% YoY—after a temporary dip during February’s deep freeze. Business IT spending as also taken off—sparking the much-discussed semiconductor shortage—but could it due for an early-aughts style correction? Raised consumer prices may be on the horizon as producers grapple with climbing costs, but household wealth is also on the rise leaving the U.S. consumer in largely good shape—even it’s come in tandem with a record federal deficit. How far will that money go in the market these days though? High price-to-earnings (P/E) and price-to-sales (P/S) ratios show just how expensive the market has become, and may even have something to say about the path forward. Meanwhile, treasury yields slid this week, helping boost equities to new records and the Dow to climb over 34,000 for the first time. But what about portfolios dependent on yields for income?
1. Liftoff? The U.S. consumer drives ~70% of our GDP:
Source: The Daily Shot, from 4/16/21
2. How much of the pandemic-driven tech spend was pulling future sales forward? Will there be a dip like the early 2000’s?
Source: The Daily Shot, from 4/15/21
3. Certainly, this demand was pulled forward:
Source: The Daily Shot, from 4/16/21
4. With the cost of goods sold (PPI) increasing, small businesses are passing on or plan to pass on their price increases:
Source: The Daily Shot, from 4/15/21
5. Stock market gains, reduced spending due to the pandemic, and stimulus checks have put the U.S. consumer in great shape. Our government’s deficit, however, as a % of GDP, has risen by almost 1/3:
Source: The Daily Shot, from 4/15/21
6. Is the market expensive? Yes, by many measures, but it can get a lot more expensive before it corrects:
Source: The Daily Shot, from 4/16/21
7. Do “traditional” valuation metrics such as price to sales matter anymore? If they do…
Source: The Daily Shot, from 4/15/21
8. Did the rise in bonds yields get ahead of itself? A little backfilling might sustain the rally. Either way, yields are still low and portfolio income is a major challenge:
Source: The Daily Shot, from 4/16/21
9. “Rates don’t matter until they do.” Real yields (yield less inflation) are still negative, giving little competition to stocks:
Source: The Daily Shot, from 4/16/21
10. On a positive note, yields rose enough to induce both the Japanese and Chinese to increase their Treasury holdings:
Source: The Daily Shot, from 4/16/21
11. The current Covid wave put a dent in Europe’s industrial manufacturing:
Source: The Daily Shot, from 4/15/21
12. While the vaccine efforts are picking up, poor countries have a severe shortage of vaccines and the most crowded countries are in crisis:
Source: The Daily Shot, from 4/15/21
13. …For instance, India has overtaken Brazil in the number two spot and now has over 200,000 new cases a day:
Source: JHU CSSE, as of 4/16/21
14. For a Friday smile:
Source: The Daily Shot, from 4/15/21
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.