The Bottom Line
● Equity markets were mixed with large company indices like the S&P 500 and Dow Jones Industrials up for the week while small cap and growth companies declined.
● Choppy trading throughout the week culminated in a wild Friday session that saw stocks whipsaw from huge losses to big gains. At one point the tech‐heavy Nasdaq was down ‐2.6%, turning negative for the year, before rallying to finish up +1.5% (but still fell ‐2.1% on the week).
● The rapidly rising yield on the US 10‐year Treasury note continues to be a primary culprit for the decline in highly valued technology and growth stocks. It rose for the fifth week in a row, climbing +16 basis points to 1.57%.
Back to Good News is Good News
For a good portion of the pandemic recovery there was a perverse trend in which bad economic news was good news for markets because it improved the odds of more monetary and/or fiscal stimulus. Conversely, markets periodically interpreted good economic news as bad news because it meant a higher probability that the punch bowl of accommodative policy and stimulus would be taken away. But on Friday the February Employment Report was released and it far exceeded the market’s expectation for 200,000 new payrolls, with 379,000 jobs added. The market really needed a shot in the arm after most stock indices, and especially growth and technology heavy indices, had been struggling for three straight days. Importantly, it was not only a strong report at the headline jobs number but the details underneath were even better. Employment has been the one key area of the economy that stubbornly hadn’t reaccelerated like housing, manufacturing, retail sales, or earnings. Sustainable improvement in employment may be what markets need to overcome the fear of rising rates and instead recognize higher rates as an indication of strength in the economy that is necessary to achieve normalization.
Digits & Did You Knows
WHERE? — The average single‐family home in the USA has appreciated +39.0%over the 5 years ending 12/31/20. Homes in Idaho (+82.5%) have experienced the greatest growth in value while homes in North Dakota (+14.1%) have seen the least percentage increase in value (source: Federal Housing Finance Agency, BTN Research).
DEDUCT THIS — $0 is the amount of money employees can deduct from their taxable income for home‐office expenses in 2020, thanks to a 2017 move from Congress that imposed new limits or disallowed most home‐office deductions. Employers, however, can receive a benefit for reimbursing workers for work‐from‐home related costs (source: WSJ).
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”).
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