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Market Strategy 5/10/2021

  • John Stoltzfus
  • May 10, 2021

“Enough is Enough”

The phrase is not yet the operative phrase for fiscal policy in the current recovery
Key Takeaways
  • With 88% of companies in the S&P 500 having reported, earnings are up 47.2% on revenue growth of 10.1%. The current earnings season continues to exceed expectations.
  • April’s nonfarm payrolls gain totaled just 266,000 jobs, falling far short of the nearly 1 million jobs gain expected in Bloomberg’s survey. Ten-year Treasury yields plunged and equities sold lower on the news. By the end of the day the Treasury yield had recovered and stocks closed at record levels, suggesting that resilience in the markets persists.
  • Moving forward the issue for Washington and Wall Street to consider will likely be how much stimulus is enough? 
two women talking

The nonfarm payroll number for the month of April surprised to the downside when it was released last Friday. The question is, was it a sign that the economic and jobs recovery is further out than what many (including us) have thought or is it a sign that too many stimulus checks are encouraging enough folks to stay at home rather than returning to work?

It’s no secret that the outsized stimulus efforts enacted to alleviate this crisis have used more of a “shot gun” effect than a more accurately targeted approach to get funds to those in need of aid to weather the crisis. No day passes of late that we don’t hear from business people directly (or in appearances and articles in the media) that there is a dearth of applicants for a sizeable number of jobs that need to be filled in the process of reopening segments of the economy that have been shuttered over the course of the pandemic.

We have always believed in the importance of the Federal Reserve taking action to restore liquidity and support in times of economic and financial crisis and we continue to feel that way in the current process of restoring the US economy from damage sustained from the pandemic.

That said, our concern now is that this crisis has also included sizeable bipartisan stimulus (and some sizeable partisan stimulus as well) to restore the economy from March of 2020 through earlier this year. However, the latest proposed stimulus efforts in our view may be too much and too late to have a positive effect as the US economy clearly shows signs that it can move forward without the current supersized proposal from the Biden Administration.

Quotation from Aenean Pretium

With business owners eager to hire and with the Labor Department’s JOLTS index showing around 7,000,000 unfilled job postings from businesses it would seem realistic at this juncture to venture that there’s plenty of opportunity for things to continue to improve.

Considering the commitment that the Federal Reserve has made in providing accommodation (which borders on largesse), a more targeted and bipartisan effort by Congress towards an extensive but traditional infrastructure program might be more effective near- and longer-term than an unconventional and costly infrastructure program dominated and obfuscated by programs related to social engineering rather than the reengineering of the country’s infrastructure. Building new and repairing existing infrastructure would create jobs that could feed the creation of more jobs and benefit communities across the United States, deliver an immediate benefit to the national economy and make a sizeable investment that would likely benefit generations of Americans in the years ahead as did the infrastructure program deployed after World War II.

What about That Payrolls Number?

While last week’s nonfarm payroll number surprised a broad array of investors, traders and market observers, history reminds us that the data series is known for its volatility, especially in periods of economic recovery from a crisis. Those who were around for the recovery from the GFC (Great Financial Crisis) will recall that much of the drama spent around a monthly piece of disappointing data was in hindsight ill spent.

Expectations based on a widely followed survey of economists taken ahead of last Friday called for about 1 million jobs to have been added in April. On the news last Friday that only 266,000 jobs had been gained in the month the yield of the 10-year Treasury took an intraday plunge and equities sold lower on the news. By the end of the day the yield on the 10-year Treasury was back to pretty much where it had closed the day before and the Dow Jones Industrial Average and the S&P 500 had closed at their latest respective record highs. 

What’s Driving This Market?

The question most asked of us by both institutional and private investors these days is “what’s keeping the market moving higher?”

As of this writing our reply remains: Among the many reasons stocks have moved higher we’d include the following: The vaccines are judged so far to be effective and are generating positive sentiment from Wall Street to Main Street and beyond. Each day more of the citizenry is getting vaccinated (even though the pace appears to be slowing) while the economic data is mostly positive suggesting an economic recovery here in the US (and even outside of the US) is in progress as local economies reopen.

First-quarter earnings for the S&P 500 (with 438 of 500 companies or nearly 88% having reported) show earnings grew 47.2% on the back of 10.1% revenue growth in the period. The second quarter is expected to provide further growth in revenues and earnings.

With business owners eager to hire and the Labor Department’s JOLTS index showing around 7,000,000 unfilled job postings from businesses it would seem realistic at this juncture to venture that there’s plenty of opportunity for things to continue to improve. 

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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