The manufacturing resurgence continued in February as the sector climbed to a 15-year high, and phenomenon isn’t just limited to the U.S. Climbing costs though could ultimately put pressure on margins and/or make their way through consumers and add yet another inflationary pressure. Meanwhile, with such a massive—and growing—divergence between tax revenue and spending, it stings to see the percentage of stimulus funds being directed toward investments and savings over their intended purpose. Is a lower income cap the answer? Yields jumped yet again this week, prompting a response from equities, but how have stocks typically performed in the long-term following a yield spike? And should we expect the same this time around or will context have something to say on the matter? 2020’s near-zero interest rates have more than one consequence after all… Over in China, manufacturing has lost some momentum and the renminbi impressive appreciation has continued; how will these developments affect the future of their economic recovery?
1. The manufacturing sector, ~11.4% of total GDP, is at a 15-year high:
Source: The Daily Shot, from 3/2/21
2. Commodity price increases are certainly affecting manufacturer’s cost of goods sold; will these costs get passed through to consumers, lessen profits, or a little of both?
Source: The Daily Shot, from 3/2/21
3. The “joy” of receiving free money is going to be replaced by the “pain” of paying it back with higher taxes…
Source: The Daily Shot, from 3/3/21
4. More evidence that the stimulus packages are missing their intended mark. Washington, please focus on those truly in need!
Source: The Daily Shot, from 3/3/21
5. The reflation crowd brought some new leadership in February:
Source: The Daily Shot, from 3/3/21
6. Historically, yield increases like we saw in February have had a negative effect on stock returns. Yet, given the near-zero start and a pandemic recovery with unprecedented stimulus, will this relationship hold?
Source: Goldman Sachs Investment Research, as of 2/25/21
7. Ultra-low coupon bonds are harder to sell when rates rise. Remember the 10-year UST had a record-low yield of 0.052% It is almost triple this now…
Source: The Daily Shot, from 3/3/21
8. The near-zero rate policy had an unintended consequence: Treasury yields were too low to attract foreign buyers…
Source: The Daily Shot, from 3/3/21
9. Negative rates are not rational over the long term. Here is one result:
Source: The Daily Shot, from 3/2/21
10. The manufacturing resurgence is not confined to the U.S. Here is Europe:
Source: The Daily Shot, from 3/2/21
11. Now that the rest of the world has “caught up”, China’s manufacturing sector is cooling off:
Source: The Daily Shot, from 3/3/21
12. The Yuan’s appreciation has not helped Chinese competitiveness…
Source: The Daily Shot, from 3/3/21
13. Children get Covid just like adults, albeit usually with much less severity, but we rarely tested them. Now that schools have started large scale testing:
Source: The Daily Shot, from 3/2/21
14. We could all add a few more humorous responses…
Source: The Daily Shot, from 3/2/21