Market Strategy 4/12/2021
- April 12, 2021
Dance With The One Who Brung Ya
Investors showed renewed interest in technology and other “growthier” sectors last week
- Q1 earnings season unofficially starts this week when the big banks begin reporting results on Wednesday. Analyst expectations having moved higher since the start of the year suggest that any disappointments could receive harsh treatment.
- Recent economic data showed the ISM surveys of manufacturers and services firms handily beating expectations, implying that anticipation of a strong economic recovery is becoming increasingly realistic.
- The weekend edition of the Wall Street Journal also noted this week that recent data showed 19.4% of the US population has been fully inoculated against COVID-19.
The Dow Jones Industrial Average and the S&P 500 closed at respective record highs last Friday in a week that saw the recent rally in value-oriented cyclical stocks fade some as information technology, consumer discretionary, and communications services outperformed to lead the broad market higher. As of the April 9 close, the NASDAQ Composite was just 1.4% below its most recent closing record high, reached earlier this year on February 12. Investors last week rebalanced to offset what has been a decided preference for value over growth since last September.
In our view, it’s not so much that investors are closing their eyes to bid stocks higher as much as it might be that nearly 12 years after the end of the recession caused by the Great Financial Crisis, there’s a feeling that higher inflation and interest rates high enough to slow or derail a widely anticipated economic recovery appear not as imminent as earlier concerns might have suggested.
Worries about the cost of proposed spending programs by the Biden administration (or how such programs will be paid for), as well as investors’ perennial mistrust of the Federal Reserve’s capability to respond to inflation notwithstanding, higher stock prices suggest that investors are focused on evidence that, for now, shows more things getting better than not.
Granted, a recent pickup in cases of COVID-19 and emergence of variants of the virus are in evidence. However, the number of people stateside getting inoculated with vaccines to stem the spread of the pandemic is moving higher by the day.
The move lower in 10-Year US Treasury yields last week suggests that yields may have seen their highs for the first half of the year.
The weekend edition of the Wall Street Journal noted this week that recent data showed that 19.4% of the stateside population has been fully inoculated against COVIDE-19 in an article entitled “Ten Signs Things are Getting Back to Normal.” Among the positive developments noted by the WSJ were:
- Re-openings of Major League Baseball games (albeit in capacities limited to comply with individual state rules as to how many fans could attend the games).
- The “World of Concrete” trade show scheduled for June in Las Vegas.
- The re-opening of Disneyland California scheduled for April 30.
- Airlines booking middle seats, with one large holdout planning to join others already doing so on May 1.
- Hotel occupancy in the US reaching 58.9% during the week of March 14—the highest level since the first week of March 2020.
- Indoor dining ramping up across the country.
Economic data released over the last two weeks shows an upward trend emerging in job growth evidenced by the March non-farm payroll employment numbers. A higher than expected uptick in the initial jobless claims last week was offset somewhat by the JOLTS index released by the Labor Department that showed job openings posted by US corporations had jumped to just under 7.4 million jobs—the highest level since November 2018.
Q1 earnings season for the S&P 500 companies unofficially begins this week on Wednesday. The big banks will start to report results for the quarter just ended. With consensus analyst expectations having moved higher since the start of the year, disappointments could receive harsher receptions. Also, companies just meeting expectations could be taken as disappointing. That said, with the economic outlook stateside improving, look for investors to focus on any guidance offered as companies report this season.
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.
Additional Market Insights
This report is issued and approved by Oppenheimer & Co. Inc., a member of all Principal Exchanges, and SIPC. This report is distributed by Oppenheimer & Co. Inc., for informational purposes only, to its institutional and retail investor clients. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The strategist writing this report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security discussed in this report, the recipient should consider whether such investment is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal.
Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete and they should not be relied upon as such. All estimates and opinions expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation.
Investment Strategy should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.
This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generally considered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes. This research is distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer Europe Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This report is for distribution only to persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, this material is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’s protection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2020.