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Market Strategy 3/01/2021

  • John Stoltzfus
  • March 1, 2021

Thanks! I Needed That

Last week’s volatility in the bond market caused equity benchmarks to give back some of their recent gains.
Key Takeaways
  • Progress around the $1.9 trillion relief bill and economic data this week which culminates with the February non-farm payrolls report are likely to capture the attention of markets and investors this week.
  • Last week’s run up in Treasury yields in our view suggests an improvement in the economic outlook rather than concern for untoward levels of inflation ahead.
  • Q4 earnings season moved toward closure. With 97% of companies in the S&P 500 having reported profits are up 5.37% on the back of 2.47% revenue growth—a much stronger result than had been anticipated by consensus analytics at the start of the season.
  • In addition to the payrolls report, we’ll also see purchasing managers data on manufacturing and services, construction spending, and consumer credit.
  • We also discuss the significance of rising copper and oil prices, which we believe are reflective of an economic recovery ahead. 
reopening of a business

Stocks took a haircut last week on the back of a bond market tantrum tied to the latter’s longstanding mistrust of monetary policymakers’ ability to navigate reflation as the US economy stands poised to move towards a new round of economic re-openings with the potential for an economic recovery.

With the Biden administration and the House of Representatives pushing hard to enact the next “bridge over troubled waters” in the form of a mega $1.9 trillion relief bill concerns about what effect a program of such size could have on interest rates and the rate of inflation longer term are popping up.

Voices expressing concern cross political party lines, investor groups as well as a host of other constituencies from Main Street to Wall Street to Capitol Hill.

With economic data continuing to show considerable resilience even as evidence of weakness remains from those segments of the economy that remain shuttered the dispute centers not on whether another tranche of rescue funding is needed; but around the cost and the size of said package and some of its components, which appear defined along party lines.

If anything most everyone would appear to agree that for all the good news regarding the efficacy of the vaccines, the resilience of economic data and Q4 S&P 500 corporate earnings the fact is—we’re still not out of the proverbial woods yet when it comes to pushing Covid-19 into the rearview mirror of history and getting the economy to run again on all its cylinders.

Quotation from Aenean Pretium

The rise in copper prices serves as a sign that expectations are for global growth to accelerate as the world moves out from under the pandemic.

The good news is that a rescue package is waiting in the wings. The bad news is the political hurdles to be traversed over the course of this week and perhaps longer remain potential sources of volatility for the bond and stock markets to navigate.

Last week saw the yield on the US 10-year Treasury surge some 13.78% with its yield rising from 1.34% on February 19 to 1.52% at close on Thursday (peaking at a high of 1.61% intra-day). Last Friday saw a tempering of market fear emerge with the US Treasury 10-year yield ending the week at 1.41% as cooler heads seemed to prevail.

In our view where the yield on the US 10-year Treasury has come from since hitting a low of 0.508% on August 4, 2020, to its intra-day high last Thursday at 1.61% (the highest since February 2020) points not toward an impending spike of inflation ahead that might cause the Fed to dramatically raise interest rates and possibly derail prospects of a stateside economic recovery but rather reflects that as the pandemic crisis begins to ebb better times are likely ahead for the US economy.

John Stoltzfus of Oppenheimer Asset Managment Inc.

John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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