Week in Review

Week-in-Review: Week ending in 05.14.21

The Bottom Line

● A big stock rally on Friday couldn’t reverse the losses incurred Monday through Wednesday. The Cboe VIX Volatility Index surged past 28 on Wednesday before falling back under 19 on Friday as the market rebounded.
● Both consumer and producer inflation accelerated much faster than expected and sent stock prices lower and bond yields higher. The S&P 500 fell ‐1.4% and the Nasdaq fell ‐2.4%, while the yield on the benchmark U.S. 10‐year Treasury note rose +0.05% to 1.63%.
● The employment picture continues to improve as weekly jobless claims fell to 473,000, a new pandemic low, and monthly job openings soared to a record 8.123 million.

Inflation fears sparks equity selloff

Global equities were down for the week after inflation accelerated much faster than expected, sparking a broad market selloff that set the S&P 500 back ‐1.4% for the week. For the technology sector, the largest sector in the S&P 500, the downturn was particularly pronounced, as it fell ‐2.2%. The tech‐heavy Nasdaq was down ‐2.1%, its fourth straight weekly decline. The inflation scare came with the April Consumer Price Index (CPI) accelerating at its fastest pace in since 2008, up +4.2% from last year, and the Producer Price Index (PPI) rising +6.2% for the last 12 months, which was the largest increase since the data began in 2010. On Wednesday the S&P 500 and the Nasdaq were down ‐4%and ‐5%, respectively, for the week but a big Friday rally helped limit the week’s damage. The Cboe VIX Volatility Index spiked as high as 28.4 before falling back to 18.8 by the week’s close. The balance of the week’s economic data came in below expectations reversing a weeks‐long trend that saw largely better than expected results. Besides the higher than expected inflation results, retail sales stalled unexpectedly and consumer sentiment was softer than forecasted. On the plus side jobless claims fell more than expected.

Digits & Did You Knows

BE CONTRARIAN — The last 7 times that the S&P 500 index had a negative total return over a trailing 12‐month period, it rebounded each time with a positive total return of at least+15% over the next 12 months. The 1‐year average total return of all 7 comebacks is +27.6%. The last example was when the S&P 500 fell ‐7.0% (total return) for the 12 months ending 3/31/20 but bounced back with a +56.4% total return for the 12 months ending 3/31/21 (source: BTN Research).
NEW HOMES — 103,700 new single‐family homes began construction in the United States in March 2021, the highest monthly total reported nationwide since June 2007 (source: Census Bureau, BTN Research).

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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

Week in Review

Week-in-Review: Week ending in 05.07.21

The Bottom Line

● Friday night heights returned as the S&P 500 and Dow closed the week at all‐time highs. The Cboe Volatility Index (VIX) fell from 18.6 last week to end Friday at 16.7.
● The yield on the benchmark U.S. 10‐year Treasury note sank ‐0.05% to 1.58% after a surprisingly big downside miss in jobs created from the April Employment report.
● The headline April jobs number was surprisingly short of the one million new jobs expected with just 266,000 jobs added by U.S. employers during the month. A shortage of workers may be a primary culprit in the jobs shortfall. Average weekly hours worked seems to support that as it matched the highest level since data began in 2006.

TGIF… stocks return to all‐time highs

For the first three weeks that ended in April, the S&P 500 set new all‐time highs. But the end‐of‐the‐week magic ended after that. Last Thursday, 4/29, marked another all‐time high but then stocks slipped back last Friday and haven’t been able to reclaim the record level. But the Friday magic returned on May 7th as the S&P 500 and Dow Jones Industrials jumped back to record levels to end the week. Interestingly it was “bad news is good news” that seemed to have fueled stocks on Friday after the Labor Department released a disappointing April employment report (see the details on the following page). Investors seem to be interpreting the weak data will mean that easy money and accommodative monetary policies will last longer now. Others dismissed the report as an outlier and continued to focus on virtually all other economic data that has been exceptionally strong and better than expected. The weak jobs report sent bond yields lower, with the yield on the 10‐year U.S. falling to 1.58% from 1.63% last Friday. The Cboe Volatility Index (VIX) also tumbled from 18.6 a week ago to 16.7 at the close of this week. The U.S. dollar was decisively lower, and has now given back all of the first quarter’s rally.

Digits & Did You Knows

STICKER SHOCK — Soaring lumber prices add $35,872 to the price of an average new single‐family home. Lumber prices seem to set records daily, now up +67% this year and +340%from last year (source: NAHB, Random Lengths, CNBC).
NEED A SCORECARD — The Biden White House announced its 3rd stimulus proposal since taking office on 1/20/21. The “American Families Plan” is a $1.8 trillion proposal (released on 4/28/21). Previously, the “American Rescue Plan Act,” aka HR #1319, scored at $1.9 trillion and signed into law on 3/11/21 and the “American Jobs Plan,” the $2.3 trillion infrastructure proposal released on 3/31/21, was introduced by the administration (source: White House, BTN Research).

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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

Month in Review

Month In Review: April 2021

Quick Takes

● Vaccinations help economy bloom. Nearly 250 million vaccinations have been administered in the U.S. marking 43% of the U.S. population with at least one vaccine dose. Meanwhile, new U.S COVID‐19 cases are down 80% from their peak in January.
● From forecast to fruition. Economic expectations began to rise after the February freeze, therapid vaccination rollout, and the reopening of economies set the stage for big economic growth… and forecasts turned to fact as economic reports during April blew past economists’ expectations.
● Everybody wins a prize. All major asset classes and virtually every equity and bond group was positive in April. Real Estate was the big winner, up +8.1% for the month and now up +17.1% in 2020.
● The late March rotation was real. Small Value (Russell 2000 Value) trounced Large Growth (Russell 1000 Growth) for much of Q1, but Large Growth fought back in late March, and that strength persisted through April. Large Growth finished as the best U.S. style for the month with a +6.8% total return and Small Value lagged with a +2.0% rise.

Asset Class Performance

April saw bond and equity returns blossom with solid gains across the asset class spectrum. April was the fifth positive month out of the past six for the S&P 500, up more than +5%, and bonds rebounded after 3 monthly losses.

Stock market highs correctly signal exceptional economic progress

Equity markets put forth another strong showing in April with the S&P 500 returning +5.3% (including dividends) and global equities (MSCI World Index) not far behind with a total return of +4.7%. April was the third straight positive month and the fifth positive month out of the past six for the S&P 500, and all eleven sectors were positive in April. In just the four months of 2021, it is up a total of +11.8%. In those four months the index has already set 25 all‐time record closing highs. That is still behind the total record highs of the last two years, and well behind the 62 record highs in 2017. But as research from Bespoke Investment Group shows, as a percentage of trading days it’s on a pace to eclipse a record year from more than 6 decades ago. As the chart below shows, 2021 would go down as a record year surpassing both 1964 and 1995 (in which there were 65 and 77 record closing highs, respectively). The continued march to more and more record highs has made many investors question if the market has gotten ahead of itself, or even reached “bubble” levels. No one can be sure on that determination and only time will tell. But the stock market is a leading indicator as investors look beyond present conditions and attempt to look ahead while economic data looks backward. And the stock market appears to be correctly indicating what has turned out to be exceptional economic growth… growth that is consistently exceeding economists expectations. For months now much of U.S. economic data has come in better‐than‐expected.

Moreover, it has been robust, not relegated to one or two sectors of the economy, but rather broad swaths of the economy. Bespoke Investment Group tracks 36 economic indicators across manufacturing, employment, housing, inflation, and the consumer. The recent monthly tally of the 36 indicators had a record high 34 of them accelerating year‐over‐year. Many will point to the easy comparisons from last March’s shutdown lows (i.e. the low base effect) as a primary factor for the exceptionally strong results, but gains of this breadth and magnitude are hard to comprehend.

Manufacturing has shown positive momentum in virtually every category and geographic region. That amount of broad, positive momentum hasn’t been seen since last July when the economy first began reopening. Employment has been strong too, with jobless claims under 600,000 for three weeks in a row now, and at a new pandemic low. Housing saw a clean sweep with all indicators on a torrid pace of year‐over‐year growth: +30% increase in Building Permits, +37% increase in Housing Starts, +67% gain in New Home Sales, and a ‐45%decline in supply! And the recent release of Consumer Confidence for the month of April showed a solid encore to March’s blowout report. While economists were expecting a bounce to 113.0, the actual reading came in at 121.7.

Bottom Line: The stock market is not the economy. Economic data looks backward while the stock market is forward looking. But with a record setting pace of new all‐time highs in 2021, the market has correctly sniffed out a broadly, and ever‐improving, economy.

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©2021 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.

Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

 

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