Manufacturing remains strong in the U.S. and saw more gains in February—even in the frozen Lonestar state—but producer prices are also climbing without accompanying gains in prices charged, and it could spell trouble. Home prices saw their biggest annual gain since 2006—11.2% year-over-year—in January and are significantly outpacing wages, but how will climbing interest rates come into play? And the eviction moratorium has been extended through June, but what lies ahead for the sector though when it finally expires? Over in the equity markets, valuations are at extremes, as is margin debt. If hedge funds are falling to leverage and margin, how vulnerable is the ever-expanding population of novice retail investors? Big Tech stocks tumbled after the 10-year Treasury yield hit its highest level in over a year to close out March, but overall, correlation between equities and bonds is climbing. What lies ahead though as infection rates also climb across the country?
A quick note before we get to the charts: there will be no new post this Friday in observance of Good Friday, but we’ll be back on Monday 4/5.
1. Despite the deep freeze, the Dallas FED’s manufacturing report was strong, similar to the other regional surveys:
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Despite-the-deep-freeze.png)
Source: The Daily Shot, from 3/30/21
2. The aggregate of this month’s FED surveys indicates that the prices paid for the costs of goods sold has far exceeded the prices received by manufacturers; this will squeeze margins, cause an inflationary increase in prices, or some of both:
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-The-aggregate-of-this-months.png)
Source: The Daily Shot, from 3/30/21
3. Housing price increases are easily outpacing income growth. With mortgage rates rising, will this important growth segment of the economy get choked off?
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Housing-price-increases.png)
Source: The Daily Shot, from 3/31/21
4. While global equity earnings have continued to improve, the markets’ P/E ratios are also near historic peaks:
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-While-global-equity-earnings.png)
Source: The Daily Shot, from 3/30/21
5. Investors are pouring more capital into more unprofitable companies than during the previous peak, the dot.com bubble in the late 1990s. When and how will the air come out of this bubble?
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Investors-are-pouring-more-capital.png)
Source: The Daily Shot, from 3/30/21
6. Do the new do-it-yourself investors understand the risks of margin? We will find out!
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Do-the-new-do-it-yourself.png)
Source: The Daily Shot, from 3/31/21
7. The markets are breaking an old maxim: “Don’t fight the FED”. Of course, the FED didn’t know about the upwards of $7.7 trillion ($1.9 + $0.9 + $1.9 and now possibly +$3 trillion) in new federal spending…
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-The-markets-are-breaking-an-old-maxim.png)
Source: The Daily Shot, from 3/31/21
8. A great historical chart showing equity and bond correlations over time.
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-A-great-historical-chart.png)
Source: The Daily Shot, from 3/31/21
9. Inflation and interest rates are, in general, rising across the globe. Much of this is due to the rise in oil prices:
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Inflation-and-interest-rates-are.png)
Source: The Daily Shot, from 3/31/21
10. Here are the daily number of U.S. Covid cases. We have circled what our CDC director spoke to and is worried about:
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-Here-are-the-daily-number.png)
Source: JHU CSSE, from 3/30/21
11. In some States, including Michigan below, the third wave has already begun.
![](https://blog.investbcm.com/wp-content/uploads/2021/03/3.31-In-some-States-including-Michigan.png)
Source: JHU CSSE, from 3/30/21