In this issue:
- Is big oil the new tech? No, but it’s doing a pretty good imitation so far in 2021
- Floating-rate bonds are having a good year
- Will commercial real estate recover from the pandemic? It’s off to a good start
Reflation Trade’s Winners And Losers In The Bond Market In 2021
The bond market is reeling from firmer reflation expectations, or at least some corners of the market are taking a hit. But in the reordered world of fixed income in 2021 there are also winners, based on year-to-date returns for a set of exchange traded funds through yesterday’s close (Feb. 23).
Macro Briefing: 24 February 2021
* Biden: US and Canada to work toward zero emissions by 2050
* Fed Chairman Powell: recovering lost jobs will take years
* Fed’s easy money policy will continue until economy recovers, says Powell
* Value investing’s old rules are history, say academics
* Exports and construction boost German GDP in fourth quarter
* Mid-Atlantic manufacturing activity continues to expand in February
* US Consumer Confidence Index continues to rise in February
* US home prices increased 10.4% in Dec vs. year ago–fastest pace in 7 years:
Reflation Today, Inflation Tomorrow?
Evidence is mounting that the disinflationary dive following the onset of the coronavirus crisis in the spring of 2020 is fading, giving way to a run of reflation. There’s a popular narrative that equates reflation with inflation, and that the former is destined to lead to the latter. Maybe, but maybe not.
Macro Briefing: 23 February 2021
* Fed and Treasury officials say US jobless rate is near 10%–well above official rate
* Price tag for severe weather blowback in Texas: $50 billion
* US factories struggling to keep up with snap-back in consumer demand
* Bond yields rise ahead of Fed Chairman Powell’s testimony in Congress
* Eurozone core consumer inflation rebounds to 5-year high in January
* UK unemployment rate at 5-year high in 2020’s fourth quarter
* US Leading Economic Index rose in January, pointing to firmer growth outlook
* Texas manufacturing sector growth accelerates in February
* US economic activity strengthened in January via Chicago Fed Nat’l Activity Index:
Commodities Were A Rare Bright Spot Last Week
Commodities and foreign junk bonds were the only winners last week for the major asset classes, based on a set of exchange traded funds. Otherwise, red ink dominated results for the US trading week through Friday, Feb. 19.
Macro Briefing: 22 February 2021
* House set to pass Biden’s $1.9 trillion coronavirus relief package this week
* Huge protests in Myanmar continue despite threats from military
* Boeing 777s grounded after Denver engine failure
* Global cases of coronavirus peaked in January, according to latest data
* Americans may still need to wear masks in 2022, Fauci says
* Will the US economic recovery accelerate and bring years of strong growth?
* Will firmer inflation create trouble for Wall Street? Maybe not
* Brent crude oil rebounds–Goldman predicts price will top $70/barrel
* German business sentiment rose far more than expected in February
* US business activity near 6-year high in February via PMI survey data:
The ETF Portfolio Strategist: 21 Feb 2021
There was nowhere to hide in last week’s broad-based market decline for our proprietary strategies: all three took it on the chin. The declines for the trading week through Feb. 19 were in line with the benchmark, Global Beta 16 (G.B16). Year to date results, however, are another matter.
Book Bits: 20 February 2021
● How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need
Bill Gates
Review via Associated Press
Gates has crafted a calm, reasoned, well-sourced explanation of the greatest challenge of our time and what we must change to avoid cooking our planet in “How to Avoid Climate Disaster: The Solutions We Have and the Breakthroughs We Need.”
His goal with this book appears to be to explain and persuade and although he doesn’t say so in the book, the implicit theme parallels something President Abraham Lincoln once said: “Give the people the facts and the nation will be safe,” meaning we Americans would make the right decisions about the problems we face if we have the facts.
Will we though?
The ETF Portfolio Strategist: 19 Feb 2021
In this issue:
- Inverse together: interest rates rise and (most) stock markets fall
- Portfolio strategy benchmarks take a hit after two weeks of gain
US equities on the defensive as Treasury yields continue to rise: Maybe it wasn’t solely about the ongoing upswing in rates, but it probably didn’t help. Whatever the reason(s), US shares fell 0.7% this week through Friday’s close (Feb. 19), based on Vanguard Total US Stock Market (VTI). The ETF posted its first weekly decline in three weeks. That still leaves the fund close to a record high, which was set only a week ago. But with interest rates rising, and showing an increasingly robust upside trend, the burning question is: How much tolerance can equities muster if the reflation trade for yields rolls on?