Dry Powder Accumulates, Indices Consolidate Gains, and Real Yields Turn Negative Across the Curve
May 3, 2021 | FIRESIDE CHARTS
Stimulus checks sent both personal incomes and personal savings soaring in March after a quarter of already significant savings growth. How will the markets react if and when so much dry powder makes its way into the system? Small and mid-caps have continued their outperformance, though the S&P 500®, 600®, and 400® Indices have all ticked lower in the past couple of weeks. Are they taking a rest before notching another leg higher or could a more significant trend reversal be on the horizon? Yields moderated slightly last week, soothing some inflation fears, but a look at the Real Treasury Yield Curve shows all is not well for those counting on fixed income returns. Commodity prices meanwhile have been soaring and are now pushing up against their long-term trendline. Will they break through or will they slowly start to return to Earth?
1. The stimulus payments are obvious. Will they successfully prime the pump of future economic activity?
Source: The Daily Shot, from 5/3/21
2. Much of the stimulus has been saved so far leaving a lot of dry powder:
Source: The Daily Shot, from 5/3/21
3. The markets ground higher in April but spent much of the last two weeks consolidating their gains:
Source: The Chart Store, from 5/3/21
4. The S&P 500 is at the top of its decade long trend channel. Will a rest allow it to continue or will the “Sell in May and go away” crowd provide a more meaningful pullback?
Source: The Chart Store, from 5/3/21
5. The inflation hawks also took a rest as yields backed off a touch across the curve:
Source: The Chart Store, from 5/3/21
6. Yet factoring in inflation, every UST will be losing money. Those relying solely on a 60/40 type portfolio are going to be disappointed!
Source: The Chart Store, from 5/3/21
7. If junk bond yields/spreads are the canary in the coal mine, all is well or the market is at an extreme:
Source: The Chart Store, from 5/3/21
8. Commodity prices are also pushing against their long-term trend line. Will their surge continue or is another rest in order?
Source: The Chart Store, from 5/3/21
9. Covid resurgence in Europe has brought a mild double-dip recession.
Source: The Daily Shot, from 5/3/21
10. To put the Covid humanitarian crisis in perspective, this is the daily demand for oxygen tanks:
Source: Statista, from 5/3/21
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.