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Market Strategy 3/08/2021

  • John Stoltzfus
  • March 8, 2021

What, Me Worry? Transitions Are Never Easy

Key to navigating a period of transition is to keep things in context and expectations right-sized.
Key Takeaways
  • Economic data, the yield on the 10-Year Treasury note, and the likely passage of the $1.9 trillion economic relief bill will garner investor attention this week.
  • Q4 earnings season moved toward closure. With 99% of companies in the S&P 500 having reported profits are up 5.29% on the back of 2.66% revenue growth—a much stronger result than had been anticipated by consensus analytics at the start of the season.
  • February’s payroll figures released last Friday signaled progress for the US economy and provided a boost to stock prices.
  • Tuesday marks the 12th anniversary of the stock market’s bottom in the Great Financial Crisis. 

Investors this week will likely stay focused on: interest rates as reflected by the yield on the 10-year Treasury, the price of a barrel of oil, and any economic data crossing the proverbial transom that might provide additional clarity as to what prospects there are for inflation as more folks get vaccinated stateside and around the world and prospects for a global economic recovery grow by the day.

Last Friday it was a significantly better than expected payroll number that gave the stock market a boost out of its recent funk, even as the yield on the 10-year Treasury nudged higher. Over the weekend news that China’s export numbers significantly exceeded expectations added credence for the case that indeed the global economy is headed in the right direction.

On the vaccine front the initial stumble in vaccine distribution is being remedied on a day by day basis.

A third vaccine by a major pharmaceutical company added to the roster of approved vaccines for distribution in the US last week is likely to boost progress in getting a larger segment of the population stateside inoculated.

In the week ahead the markets will look to take direction from a raft of economic data tied to wholesale inventories, small business optimism, consumer price inflation and producer price inflation.

Quotation from Aenean Pretium

With the passing of the gargantuan aid bill expectations could turn toward the potential for the long awaited infrastructure program in the US.

The passage of the $1.9 trillion economic rescue program will be vetted by bulls and bears seeking to get a read on how it will affect the economy, inflation and the markets. The market will remain highly sensitive as to how effective the implementation of this latest tranche of economic rescue will be.

With the passing of the gargantuan bill expectations could turn toward the potential for the long awaited infrastructure program in the US. Even though infrastructure is widely considered to be the program both sides of the political aisle are ready to embrace, the sticking points are likely to be the structure of such a program, whose constituencies are most likely to benefit as well as the cost and how such a program will be funded.

Hey honey, don’t forget our anniversary!

Tuesday March 9th marks the 12th anniversary of the bottom in the equity market (as represented by the S&P 500) in the Great Financial Crisis. We remember the day all too well: the preponderance of doomsayers who stepped to the front of the screen predicting that things could only get worse. The very next day the equity market began to rally carried on the wings of stimulus provided by the Federal Reserve. That “next day rally” moved ahead over the next 11 years not withstanding a number of pullbacks of as much as nearly 20%—until Covid19 overwhelmed the landscape and disrupted a multiplicity of economies, societal entities and markets around the world.

It took around six and a quarter years for the S&P 500 to get back to its pre-financial crisis high of 1565. From the pre-pandemic crisis high on the S&P 500 of 3386.15 it took just six months to midAugust 2020 to get to the pre-crisis high and then move higher. Talk about a “warp speed” recovery.

In our view a large part of the recovery process from the latest crisis can be attributed to the quick response of the Federal Reserve to the situation and its sensitivity to the needs of the economy it honed in the prior crisis. The combined efforts of the past Administration, both aisles of Congress, medical personnel and the health care sector as well as the efforts of the new administration added momentum and depth of response that while expensive contributed to the successes thus far in meeting the challenges from Covid-19.

We continue to favor equities in the current transitionary environment. We remain overweight US equities while maintaining meaningful exposure to international developed and emerging equity markets. We persist in favoring information technology and cyclicals over defensive sectors. For style we prefer a barbell approach maintaining exposure to growth in what is likely to remain a low interest rate environment even as yields move higher in response to what we expect will be a sustainable economic expansion stateside that will feed a global economic recovery.

Among the immediate risks that lie on the landscape are Covid-19 and its variants, the process of economic re-openings stateside and elsewhere around the world that lie ahead, domestic politics, geopolitics and the perennial risks that lie in the realm of the unexpected

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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