Dear Valued Clients and Friends –
Day two of this new week and new month is behind us. Some fun things to cover …
Off we go!
- Futures opened last night up +50 points and had gone negative 80 points by bedtime. They were down 30 or so points bright and early this morning.
- The market opened up 30 points or so, and got up a hundred and down a hundred throughout the day, but then closed at the low down 144 points, but with the S&P 500 down -0.81% and the Nasdaq down -1.69%.
*FactSet, DJIA, March 2, 2021
- Yesterday’s market rally was the highest breadth day we have seen in several months with 86% of the companies in the NYSE advancing.
- This chart goes back to the beginning of 2017 and shows the level of Growth’s outperformance over Value over those three years. The reversal that began in Q4 2020 has picked up steam in Q1 2021, for now.
*Strategas Research, Technical Strategy Report, March 2, 2021, p. 10
- The 10-year U.S. Treasury Yield closed at 1.40% today
- The top-performing sector today was Materials (+0.6%) – the only positive sector on the day, and the bottom-performing was Technology (-1.7%).
Top New Stories
- President Biden has lent his support to a group of Amazon workers that are looking to unionize in Alabama. The support was praised by Bernie Sanders, softening any tensions that may have been feared after the abandoned minimum wage bill.
- The Neera Tanden nomination to OMB is still alive and in the hands of Sen. Murkowski of Alaska.
- The 48,000 reported new cases yesterday was the lowest in more than four months.
- Merck and the federal government have come to a deal for Merck to help facilitate the distribution of the Johnson & Johnson vaccine treatment.
- A quick note on JNJ’s 72% efficacy: That refers to the vaccine’s ability to block any symptomatic disease – including very mild fevers and colds. The efficacy is 86% for “severe” disease, and 100% for hospitalization and death. That sounds good.
- Nearly 60% of the population that is age 75 or older has received a vaccine shot in the United States.
- All Apple stores nationwide are open for the first time since March 2020
- Texas Governor, Greg Abbott, lifted remaining COVID restrictions throughout Texas, allowing all businesses to re-open next week
- The New York state legislature reached an agreement to curb the emergency powers of Governor Cuomo that were assumed at the beginning of the pandemic.
- We are back to over half of the daily air travelers domestically that we were pre-COVID, and I believe have plenty of room to grow above and beyond expectations as part of my “pent-up demand” thesis in Q2 and especially Q3.
- The parliamentarian approved including ERISA support provisions in the stimulus bill for the budget reconciliation process. Moderate Democrat Senators (notably Jon Tester and Joe Manchin) are in communication with the White House about thinning the size of the package in line with a more targeted approach. They seem to accept, and I certainly forecast, that the ship has mostly sailed. I suspect they will get a very small trim off the total size of the project, but that it will largely go forward in its present size and composition.
- Senate hearings began for the Biden administration nominee to chair the SEC, Gary Gensler, as well as the Consumer Financial Protection Bureau, Rohit Chopra. Today’s hearing seemed to indicate a high-priority agenda for incoming regulators around do-it-yourself trading apps.
- The difference in impact to state and local tax revenue in this COVID economic contraction compared to the Great Financial Crisis is one of the most surprising things to many who analyze such things. That state and local tax revenue did not decline as expected is one of the reasons some moderate Democrats are asking to decrease this portion of the COVID stimulus bill.
- I talked to Larry Kudlow on his show today about the proposed wealth tax from Senator Warren.
- Chairman Powell recently said that M2 money supply in excess of nominal economic growth is not necessarily inflationary, as most monetarists were trained many years ago. What I believe is being missed is not that money supply does not matter, but it is that the velocity of money does matter (something Milton Friedman knew and taught, but did not emphasize enough). It is the impact of fiscal and monetary policy on velocity that keeps us in a deflationary cycle, not that inflation is disconnected from M2. A money supply in line with nominal GDP growth is exactly the right equilibrium, no matter how many policy interventions make it hard to come by.
Oil and Energy
- WTI Crude closed at $59.47, down 0.47% today
- Natural gas sits at $2.88
- Clients will receive the Weekly Portfolio Holdings Report in their email inboxes bright and early tomorrow morning, complete with substantial YTD comments.
Happy Tuesday night!
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
The DC Today features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.