Read the 10 stories to remember from the week which ended April, 2nd 2021.
Story #1: A strong month of March and first quarter for the S&P 500 and global risk assets.
March was the fourth positive month out of the past five for the S&P 500, which rose 4.2%. All 11 sectors posted positive results, led by energy’s 29.3% gain. For the first quarter, the S&P 500 added 5.8%. In terms of cross-assets performance, Commodities, US small & mid-caps, US value, Energy sector and some EM countries were the best performers in Q1. Oil surged over 25% in Q1, its best quarter since Q2 2020. After 3 straight quarterly losses, the dollar surged in Q1 to its highest since early November. Meanwhile, Gold had its worst quarter since Q4 2016 (and its worst Q1 since 1982). US Treasury's Total Return in Q1 was the worst since Q3 1980.
Story #2: S&P 500 at 4,000 for the first time.
The large-cap S&P 500 Index made news on Thursday for crossing the 4,000 threshold for the first time. It has been a rapid rise to the 4,000 mark, as the index first breached 3,000 on July 12, 2019. It took nearly three times that long to rise from 2,000 to 3,000. The technology-heavy Nasdaq Composite index led the weekly advance, however, helped by gains in a wide range of semiconductor and hardware stocks, as well as a rally in Facebook shares. For the first time in eight weeks, U.S. large-cap growth stocks outperformed their value counterpart. Small Caps hit their highest level in 3 weeks.
Story #3: Archegos contagion worries weighed on markets at the start of the week.
The week started out on a mixed note, due to continuing ripple effects from the previous week’s implosion of Archegos Capital Management. Having suffered steep losses in holdings of U.S. and Chinese media and internet firms, Archegos was forced to liquidate large positions in other widely held stocks through discounted “block trades,” driving share prices lower. In addition, two major global banks – Crédit Suisse and Nomura - that had participated in so-called swap trades with Archegos warned investors that they might suffer significant losses.
Story #4: Biden infrastructure plan optimism.
Concerns over any Archegos’ contagion quickly diminished, as investors’ sentiment appeared to largely be driven by Joe Biden’s infrastructure plan, which he unveiled on Wednesday. The Biden administration detailed its financial plans to spend $2.25 trillion to improve America’s infrastructure. The bill would vastly increase spending on internet and transportation infrastructure, as well as research and development. The cost would be covered by $2 trillion in corporate tax increases over 15 years, with the corporate tax rate rising to 28% from the current 21%. Biden’s plan did not include tax increases on upper income individuals, as some had speculated.
Story #5: US Factories at their busiest in nearly 40 years; US Labor market continues to recover
The week’s economic data appeared largely supportive of markets. US Conference Board consumer confidence index registered its biggest gain in nearly 18 years in March, while its gauge of consumer expectations had reached its best level since the summer of 2019. Regional manufacturing indexes also surprised strongly on the upside, while the ISM gauge of factory activity hit its highest level since December 1983. Friday’s labor market report—released on a day when U.S. stock exchanges were closed—delivered two positive surprises. The U.S. economy generated 916,000 jobs in March—far exceeding expectations—and initial jobs gain estimates for January and February were revised upward by a total of 156,000.
Story #6: Stock market calm
A measure of investors’ expectations of short-term stock market volatility fell to the lowest level in about 14 months, as the Cboe Volatility Index slipped to 17 on Thursday. Twelve months earlier, in the early days of the pandemic, the so-called VIX was above 50.
Story #7: Bond yields volatility; Dollar/yen at 12-month high
Yields of U.S. government bonds saw little movement overall in a week that concluded a tumultuous quarter in the fixed-income market. The jobless claims data seemed to drive a small decline in the yield on the benchmark 10-year U.S. Treasury note at the end of the trading week. Still, we note that US 5Y yields are now at their highest since Feb 2020. A spike in U.S. Treasury yields saw the U.S. dollar climb to a one-year high against the yen on Wednesday and, at Thursday’s close, the USD was trading in the high JPY 110 range. In the rest of the world, Core eurozone government bond yields ended higher overall.
Story #8: European shares rose to near record highs.
In a shortened trading week, optimism about a speedy economic recovery pushed major European equity indices higher. Expectations for U.S. infrastructure spending helped alleviated concerns of a longer-than-anticipated lockdown on the Continent. The STOXX Europe 600 Index ended 2% higher while Germany’s Xetra DAX Index rose about 3.0%. The UK’s FTSE 100 Index was little changed. The gains took place French President Emmanuel Macron decreed a third nationwide lockdown that will last a month to curb a jump in coronavirus infections across the country.
Story #9: Chinese equities were strong ahead of a long weekend.
Sentiment on China stocks was buoyed by the news of an additional tax reduction of RMB 550 billion to consolidate the economic recovery, strong March purchasing manager’s index data, and the better tone of U.S. and global markets. From the previous Friday to Thursday April 1, the CSI 300 and Shanghai Composite each rose by 1.4%. China is still reporting small numbers of new COVID-19 cases. China’s official PMIs for manufacturing and services published by the National Bureau of Statistics (NBS) were better than expected in March. For example, export orders and new orders improved by 2.4 and 2.1 to 51.2 and 53.6, respectively. The Caixin/Markit manufacturing PMI was less upbeat, however, missing the Bloomberg consensus (51.4) while remaining in expansion territory at 50.6.
Story #10: Cryptos continue to soar.
Total crypto market capitalization posts new all-time high above $1.9T with Bitcoin flirting with $60k while Ethereum crossed $2k. Total crypto market cap now surpassed that of Saudi Aramco. Cryptos all soared in Q1 with Bitcoin surging over 100% in Q1 - its 4th quarterly gain in a row; and Ethereum exploding 150% in Q1 - its best quarter on record.
Source: T Rowe Price, John Hancock, Image: www.etftrends.com