The Independent Market Observer

Positive Medical and Economic Trends Continue in May

May 28, 2021

Given how much things have improved on the medical front, I will now be doing two pandemic updates a month. The video update will appear on the second Friday of the month, while this written update will appear on the last Friday of the month. Have a great holiday weekend!

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Losing the COVID 19

May 27, 2021

Looking at the title, you could be forgiven for thinking I have finally reached that point in life where I start referring to things with “the”—"The Google,” for example. In fact, I am looking back to college, referencing a phenomenon known as the freshman 15: the 15 pounds you gained when you started eating at the dining hall. The pandemic has had the same effect on me, but even worse. Of course, being an overachiever, I wasn’t going to settle for just 19 pounds.

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Happy Birthday to the Dow!

May 26, 2021

Today marks, in many ways, the birthday of my profession. On May 26, 1896, Charles Dow first published a list of 12 industrial companies, combining their prices in an index for the first public index of the stock market. Note that phrase, because a standard of measurement—an index—was the necessary first step in transforming a market of stocks (i.e., individual companies) into a stock market. Before, we had a bunch of trees, and it was hard for investors to see the forest. Dow put the forest front and center with his index.

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Is the Pandemic Over?

May 25, 2021

From a medical perspective, is the pandemic over? The answer is simple: I don’t know. The same is true if we look at it on a global basis: I don’t know. But when we look at the U.S. and when we consider the economic—rather than the medical—effects, then I think the answer is pretty clearly yes. We are now in the post-pandemic era.

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Monday Update: Initial Jobless Claims Set New Pandemic-Era Low

May 24, 2021

Last week saw a number of economic updates, with a focus on housing, the minutes from the Fed’s most recent meeting, and the weekly initial jobless claims report. This will be another busy week for updates, with news to come on consumer confidence in May and April’s durable goods orders and personal income and spending reports.

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Banks Back on the Road to Recovery

May 21, 2021

Banks have been deeply out of favor for a long time. In fact, you can see in the chart below just how poorly the S&P 500 Financials Index has performed compared with the rest of the index in this century. Bank stocks had barely started showing signs of life after a lost decade since the great financial crisis when the COVID-19 pandemic hit. The Fed quickly sprang into action and brought the federal funds rate back to the floor after barely taking it halfway up to the pre-2008 level. Economic activity shut down and millions lost their jobs. Banks paid a price yet again, as their stocks were one of the worst hit when the pandemic brought the world to a grinding halt in 2020.

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Inflation Risks Ahead?

May 20, 2021

As we discussed yesterday, the current inflation data simply is not that scary. Yes, there are signs of inflation, and the most recent numbers were startling. But when you break down those numbers, take out the pandemic effects, and normalize over a longer time period, inflation is pretty much where it was in 2018 and 2019.

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Is Inflation as Scary as It Seems?

May 19, 2021

Today’s post was cowritten by Peter Essele, vice president of investment management and research.

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Bumpy Road Ahead! Navigating Our Way Back to Normal

May 18, 2021

I was going to write a piece on inflation today, but I got sidetracked. Sorry about that, and I promise to post on that topic tomorrow. Today, I am spending some time on getting back to work—in the office.

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Monday Update: Inflationary Pressure Picks Up in April

May 17, 2021

Last week saw a number of important data releases, with much of the focus falling on the April inflation reports showing prices rising by more than expected during the month. This will be another busy week for updates, with the housing sector and the minutes from the most recent Fed meeting serving as highlights.

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Coronavirus Update: May 14, 2021 [Video]

May 14, 2021

Given how much things have improved, I’ll be taking this video to a monthly schedule, on the second Friday of the month—I’ll see you then.

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Monthly Market Risk Update: May 2021

May 13, 2021

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Equity markets continued to rally in April, with all three major U.S. indices setting new all-time highs during the month. The Dow Jones Industrial Average gained 2.78 percent in April, while the S&P 500 saw a 5.34 percent increase. The Nasdaq Composite led the way with a 5.43 percent gain. Markets were supported by improvements on the public health front and falling long-term interest rates. The 10-year Treasury yield declined in April, breaking a three-month streak of rising long-term rates.

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Economic Risk Factor Update: May 2021

May 12, 2021

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

The economic recovery continued in April, driven by improvements on the public health front and the lingering tailwind from the most recent federal stimulus bill. Consumer confidence surged during the month, highlighting increased optimism from consumers for a return to more normal economic conditions throughout the year. Service sector confidence fell slightly in April but remains near record territory. The weakest data point was employment, with April’s employment report showing a significant drop in job growth. Although it marked four consecutive months with job growth, the drop called into question how sustainable recent job growth might be.

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What Do Corporate Earnings Tell Us About the Rest of the Year?

May 11, 2021

One of the big surprises over the past couple of weeks has been the strength of corporate earnings for the first quarter. As of the end of last week, according to FactSet, seven of eight companies (about 440 companies or 88 percent) had reported. Of these 440 companies, about 385 (86 percent) beat expected earnings. These are the highest levels of beats on earnings seen since the start of records in 2008.

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Monday Update: Pace of Hiring Slows in April

May 10, 2021

Last week saw a number of important economic updates, with a focus on business confidence in April and the recent jobs reports. The April employment report showed a slowdown in the number of new jobs added, but weekly unemployment claims fell to a new pandemic-era low by the end of the month. This will be another busy week, with updates to come on April’s inflation, retail sales, and industrial production, as well as a first look at consumer confidence in May.

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What Does the COVID Surge in India Mean for the Global Recovery?

May 7, 2021

India is in the midst of a brutal second wave of COVID-19, with the situation continuing to deteriorate by the day. While the human toll is massive, the economic impact is also not insignificant. At the start of 2021, India was expected to be one of the fastest-growing major economies in the world. Now, it is expected to succumb to a massive economic shock.

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Medical Risks Rolling Over, Economy Accelerating

May 6, 2021

April was a good month. While it started with what looked like another wave of infections, by month-end, we were back at recent lows for both case growth and positive test rates. Vaccinations have now hit a substantial part of the population, and that looks to have controlled the virus. The medical risks are still real, but they are now about whether and when we hit herd immunity, rather than whether we have a fourth wave. This is significant progress and means the medical risks are low and likely to decline further over the next month.

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Looking Back at the Markets in April and Ahead to May 2021

May 5, 2021

If the month of March was a turning point (and it was), the month of April demonstrated that March was not a fluke. The data showed we have really turned the corner in many ways. In April, the fourth wave of the pandemic started—and then fizzled out, resulting in much lower infection rates to end the month. Layoffs tumbled and consumer confidence rose to pre-pandemic levels. Markets rallied to all-time highs once again. In April, things got better across the board.

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Monday Update (on Tuesday): Consumer Confidence Climbs in April

May 4, 2021

Last week saw the release of a number of important economic data reports. Better-than-expected consumer confidence and personal spending reports served as the week’s highlights. This week will be another busy one for news, with the focus on April’s business confidence and employment reports.

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Market Thoughts for May 2021 [Video]

May 3, 2021

April was a good month for the markets. The S&P 500 and Nasdaq gained more than 5 percent, while the Dow was up almost 3 percent. These returns were driven, in part, by the medical news, with new case counts, hospitalizations, and deaths all down. While the medical risks declined, reopening accelerated. Job growth rose, and weekly layoffs dropped. Consumer confidence and spending also improved.

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