Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 13

Happy Monday!  If you’re still alive in your NCAA bracket, hope you picked Gonzaga—they look tough. 

The Markets in Review

Thanks to an incredibly strong close last Friday, the primary TV benchmarks (S&P 500, Dow Jones, NASDAQ) ended up last week with a small gain, though more cyclical/small cap fare closed with a loss of just over 1%. 

The S&P 500 closed the week at a new all-time high on a closing basis. The average stock in the overall U.S. market is now up 16% on the year. The S&P 500 is up 6%. The Nasdaq is up 6% YTD.  

Entering the week, the U.S. market is up 58% over the last year (at one point last week, at the one-year anniversary of the bear market low from March 2020, the year-over-year gain was nearly 85%).  Small caps are up 85% over that same time frame. 

These one-year returns from last week were impressive. To put it into context, here are some numbers from BeSpoke Investments:

  • For the S&P 500, its one-year gain was the strongest since the 1930s. 
  • For the Nasdaq 100, its one -year gain was its strongest since the Dot Com bubble. 
  • For the Russell 2,000, its one-year gain was its strongest ever dating back to the index’s beginning in the late 1970s.

Market Pressure

Pressure on the market last week came from a handful of places: 

  • Month/quarter-end related index selling 
  • Global COVID reopening and rising infection concerns 
  • Economic data not surprising to the upside like it once was (even GDPNow is now moving lower on expected 1Q GDP Growth)
  • Finally, the market is technically “overbought.”  In other words, the market has had some strong quick price gains. It could use a pause to refresh.  

There were positives for the market last week, though.  First, interest rates finally went down. The 10-year Treasury dropped to 1.67% from 1.74% the week before, the first weekly drop in rates in some time. 

Another plus for the markets, of course, is the pace of vaccinations. As of March 28, more than half a billion vaccinations (505 million) have been administered across 140 countries, at the rate of approximately 12.7 million/day. That includes 137 million doses in the US, or more than 2.6 million per day*. President Biden said that the goal is now to distribute 200 million vaccines in his first 100 days in office. I had my first vaccination this weekend—what an impressive operation. Efficient and friendly. 

Yet another plus for the market, and especially the financial sector, is that the FOMC loosened restrictions on banks from distributing dividends.

Of course, there were many notable news events last week: a stuck ship in the Suez canal (it has since been freed), a hedge fund missing margin calls putting pressure on Chinese stocks, automakers such as Ford, Jeep, and Dodge closing plants due to chip shortages.

Economic data last week was mixed. Good consumer confidence (biggest jump in 8 years) and manufacturing data (PMIs) surprised to the upside.  A bunch of numbers surprised to the downside, though. Harsh weather from the polar vortex in February did have an impact on some economic data. 

Looking Ahead

Lots of data to watch this coming week. The big number is Friday’s non-farm payroll. Look for a HUGE number of new jobs as the economy continues to open. The unemployment rate is expected to drop from 6.2% to 6.0%. Given the stock market is closed Friday and doesn’t have a chance to immediately react to that data, it generally means that all else being equal, many stock traders will reduce risk going into the long Easter weekend. 

Have a great week! For more insights and commentary, visit our Financial Advisor Success Hub.

 

1059-OPS-03/29/2021

*https://ourworldindata.org/covid-vaccinations 

 

The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

 

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

About Rusty Vanneman
Rusty Vanneman, CFA, CMT, serves as Chief Investment Strategist of Orion Portfolio Solutions. He has been with Orion since 2012, previously serving as President and Chief Investment Officer of CLS Investments. Prior to joining the Orion organization, Mr. Vanneman served as Chief Investment Officer and Managing Director for an RIA in the greater Boston area. His 11-year tenure at the RIA included a five-year span during which the firm was owned by E*TRADE Financial, where he also served as Senior Market Strategist for E*TRADE Capital. He also served as a Senior Analyst at Fidelity Management and Research in Boston. Mr. Vanneman received a Bachelor of Science degree in Management from Babson College, where he graduated with high distinction. He is a CFA charterholder and member of the CFA Institute. He also holds the Chartered Market Technician® (CMT) designation and is a member of the CMT Association.