Week in Review

Week-in-Review: Week ending in 06.25.21

June 28, 2021

The Bottom Line

● Trading remains choppy but volatility dropped as stocks rallied to new record highs and rebounded nicely from last week’s pullback. Gains were broad based with both U.S. and overseas stocks rising across styles and sectors.
● The yield on the 10‐year U.S. Treasury turned higher this week, following Fed Chair Powell’s dovish Capitol Hill testimony, in contrast to the Fed’s hawkish tone the prior week. As a result, the yield curve returned to steepening.
● Economic data continued to suggest solid expansion with stronger than expected growth in the preliminary June manufacturing and services purchase managers indices which hit a new record high of 62.6.

Stocks rebound from last week’s fall

Stocks posted solid weekly gains and set more fresh record highs along the way. The S&P 500 finished at an all‐time high on Friday, capping its best week since February with a +2.7%advance to rebound from last week’s Federal Reserve‐induced pullback. The giant cap Dow Jones Industrial Average rose +3.4%, the small cap Russell 2000 Index popped +4.3%, and the tech‐heavy Nasdaq Composite climbed +2.4%, after hitting an all‐time high on Thursday. As stocks rallied, Treasuries were choppy after last week’s hawkish monetary policy comments by the Fed, while Fed Chairman Jerome Powell was more dovish this week in his Congressional testimony stating the central bank sees no risk of runaway inflation and will support the economy for as long as it takes to complete its recovery. The yield on the 10‐year note rose +8 basis points (bps) over the week to 1.52%. The Treasury yield curve steepened after last week’s unexpected flattening. On Thursday a group of bipartisan Senators and President Biden agreed on a nearly $1 trillion spending package over five years for core infrastructure projects such as roads, bridges, and mass transit. Economic data continues to suggest solid expansion.

Digits & Did You Knows

STOCKS AND INFLATION — In the last 70 years (1951‐2020), inflation as measured by the Consumer Price Index (CPI) has been at least +5% in 12 different years, most recently in 1990. The total return for the S&P 500 has been split over those 12 high‐inflation years, rising in 6 and falling in 6. The average total return for the S&P 500 over all 12 years is just+3.2% (source: BTN Research).
FEWER CHOICES — There were 1.16 million existing homes for sale in the U.S. as of 4/30/21, up a bit from the 1.03 million for sale as of 2/28/21, which was the lowest level ever reported for data tracked since 1999 (source: National Association of Realtors, BTN Research).

Click here to see the full review.

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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: May 2021

June 9, 2021

Quick Takes

● Heavyweight bout. Much of May was a battle between rising inflation fears and growing optimism from the U.S. economic recovery. Overall, though, the data points to an economy, and corporate earnings picture, that remains in an upswing.
● All’s well that ends well? There were no corrections in May, but trading was choppy. In both the second and third weeks of the month the S&P 500 traded more than ‐4% below the May 7th all‐time high, yet closed May just ‐0.7% off the record. In 11 of May’s 20 trading days, VIX was above 20 but ended at 16.8.
● Everybody’s still a winner. For the second straight month all major asset classes had positive returns, although May’s gains were more modest. Both U.S. and developed international equities are up double digits in 2021, and U.S. real estate is up +18.1%.
● Fixed income was flat. Bonds rose in May, but just barely. The best performers were Treasury‐inflation protected securities (TIPS) and investment‐grade bonds. After a rapid rise in Q1, the 10‐year Treasury yield spent April and May almost entirely in a range between 1.5% and 1.75%, closing May at 1.58%.

Asset Class Performance

May was defined by positive, yet modest, gains for all major asset classes. International developed and emerging market equities led in May. International bonds also finished ahead of U.S. bonds as the U.S. dollar fell further.

Vaccinations & Improving Economy Have Investors Smiling

COVID‐19 trends continue to make material improvements on virtually all fronts. The U.S. has administered over 295 million vaccines, with more than 40% of the population now fully vaccinated. The 7‐day average of new positive cases has declined to the lowest levels since the start of the pandemic and are now down ‐94% from their January highs. The 7‐day average of deaths per day is now under 400, ‐88% from their January highs. The percentage of positive COVID‐19 tests in the U.S. fell below 2% for the first time, a new pandemic low. With all the progress on the vaccination and COVID‐19 case fronts states and businesses began to fully reopen. That has resulted in a U.S. economic recovery unlike any in recent history. Consumers have trillions in extra savings and stimulus funds, banks have amassed capital, business are eager to hire and restock inventories, and new businesses are being established at the fastest pace on record. That all has investors in an optimistic mood. Rather than “Sell in May and Go Away”, investors sent the S&P 500 to new all‐time highs on May 7th while the Cboe VIX volatility index fell to 16.7, near its lowest levels since early 2020. But the remainder of May was a battle between the bulls and bears as the speed of the recovery led to bouts of inflationary scares and shortages of goods, raw materials, and workers. Private sector wages and salaries are up a staggering +19.4%in the past year and are now +5.5% above pre‐COVID levels. Consumer spending was the biggest driver of real GDP growth in Q1, including spending increases for motor vehicles and parts that increased +66.2%, durable goods that rose +48.7%, and food services and accommodations

that jumped +26.6%. Gains like those, even off the extraordinarily low bases from the depths of last year’s COVID lockdowns, are bound to create inflation concerns. U.S. stocks pulled back more than ‐4% from the May 7th all‐time highs in both the second and third weeks of the month, and VIX volatility spiked to about 28 and 26 on each of those declines. But in the end the bulls took the victory as investors pushed aside the inflation fears in favor of recovery optimism. The S&P 500 rose +0.7% to post its fourth consecutive positive month, and sixth of the past seven. The small‐cap Russell 2000 index, which is more leveraged to the economic reopening, posted its eighth straight positive month for the first time since 1995.

Importantly, vaccination rates in Europe have picked up after a relatively slow start. That has helped Eurozone economic sentiment improve for four straight months and hit its highest level since 2018.The COVID crisis in India has also made much needed progress with over 190 million vaccines so far administered–only behind the totals of US and China. As a result, those economies are also rebounding nicely. As seen in the chart above, both developed and emerging international PMIs are rising and are well into expansion levels (above 50). The MSCI EAFE Index gained +3.3% in May, outperforming U.S. stocks for the first time in 2021.

Bottom Line: Global equities rallied for the sixth time in seven months as vaccinations helped accelerate the recovery for most countries. Ongoing fiscal stimulus and improving earnings also boosted investor confidence.

Click here to see the full review.

 

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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.

COVID-19 Week in Review

Month-in-Review: May 2021

June 4, 2021

Quick Takes

● Heavyweight bout. Much of May was a battle between rising inflation fears and growing optimism from the U.S. economic recovery. Overall, though, the data points to an economy, and corporate earnings picture, that remains in an upswing.
● All’s well that ends well? There were no corrections in May, but trading was choppy. In both the second and third weeks of the month the S&P 500 traded more than ‐4% below the May 7th all‐time high, yet closed May just ‐0.7% off the record. In 11 of May’s 20 trading days, VIX was above 20 but ended at 16.8.
● Everybody’s still a winner. For the second straight month all major asset classes had positive returns, although May’s gains were more modest. Both U.S. and developed international equities are up double digits in 2021, and U.S. real estate is up +18.1%.
● Fixed income was flat. Bonds rose in May, but just barely. The best performers were Treasury‐inflation protected securities (TIPS) and investment‐grade bonds. After a rapid rise in Q1, the 10‐year Treasury yield spent April and May almost entirely in a range between 1.5% and 1.75%, closing May at 1.58%.

Asset Class Performance

May was defined by positive, yet modest, gains for all major asset classes. International developed and emerging market equities led in May. International bonds also finished ahead of U.S. bonds as the U.S. dollar fell further.

Vaccinations & Improving Economy Have Investors Smiling

COVID‐19 trends continue to make material improvements on virtually all fronts. The U.S. has administered over 295 million vaccines, with more than 40% of the population now fully vaccinated. The 7‐day average of new positive cases has declined to the lowest levels since the start of the pandemic and are now down ‐94% from their January highs. The 7‐day average of deaths per day is now under 400, ‐88% from their January highs. The percentage of positive COVID‐19 tests in the U.S. fell below 2% for the first time, a new pandemic low. With all the progress on the vaccination and COVID‐19 case fronts states and businesses began to fully reopen. That has resulted in a U.S. economic recovery unlike any in recent history. Consumers have trillions in extra savings and stimulus funds, banks have amassed capital, business are eager to hire and restock inventories, and new businesses are being established at the fastest pace on record. That all has investors in an optimistic mood. Rather than “Sell in May and Go Away”, investors sent the S&P 500 to new all‐time highs on May 7th while the Cboe VIX volatility index fell to 16.7, near its lowest levels since early 2020. But the remainder of May was a battle between the bulls and bears as the speed of the recovery led to bouts of inflationary scares and shortages of goods, raw materials, and workers. Private sector wages and salaries are up a staggering +19.4%in the past year and are now +5.5% above pre‐COVID levels. Consumer spending was the biggest driver of real GDP growth in Q1, including spending increases for motor vehicles and parts that increased +66.2%, durable goods that rose +48.7%, and food services and accommodations

that jumped +26.6%. Gains like those, even off the extraordinarily low bases from the depths of last year’s COVID lockdowns, are bound to create inflation concerns. U.S. stocks pulled back more than ‐4% from the May 7th all‐time highs in both the second and third weeks of the month, and VIX volatility spiked to about 28 and 26 on each of those declines. But in the end the bulls took the victory as investors pushed aside the inflation fears in favor of recovery optimism. The S&P 500 rose +0.7% to post its fourth consecutive positive month, and sixth of the past seven. The small‐cap Russell 2000 index, which is more leveraged to the economic reopening, posted its eighth straight positive month for the first time since 1995.

Importantly, vaccination rates in Europe have picked up after a relatively slow start. That has helped Eurozone economic sentiment improve for four straight months and hit its highest level since 2018.The COVID crisis in India has also made much needed progress with over 190 million vaccines so far administered–only behind the totals of US and China. As a result, those economies are also rebounding nicely. As seen in the chart above, both developed and emerging international PMIs are rising and are well into expansion levels (above 50). The MSCI EAFE Index gained +3.3% in May, outperforming U.S. stocks for the first time in 2021.

Bottom Line: Global equities rallied for the sixth time in seven months as vaccinations helped accelerate the recovery for most countries. Ongoing fiscal stimulus and improving earnings also boosted investor confidence.

Click here to see the full review.

 

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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.

Week in Review

Week-in-Review: Week ending in 04.30.21

May 3, 2021

The Bottom Line

● Global equities were little changed for the week with the S&P 500 essentially flat while the Nasdaq, Russell 2000, and international stocks were slightly negative.
● The yield on the benchmark U.S. 10‐year Treasury note climbed +0.07% to 1.63% as commodity prices continued to rally and inflation expectations continued to rise.
● Transportation stocks are at all‐time highs after 13 straight weeks of gains, their longest winning streak in 122 years. Railroads, airlines and trucking companies make the Dow Jones Transportation Average, which is up + 23% this year as investors reward companies that will benefit from the U.S. returning to normalization.

Americans get back out and about.

Global equities were little change for the week, with the S&P 500 essentially flat at +0.02%, while the Nasdaq Composite and Russell 2000 small cap index fell less than half a percent. Although technology has been the driving force for markets since the pandemic recovery began more than a year ago, it has been old fashioned railroads, airlines, and trucking companies that are enjoying strength lately. The Dow Jones Transportation Average gained +1.4% last week, marking its 13th consecutive weekly advance, which is the index’s longest streak since it rose for 15 straight weeks in January 1899. The Transportation index is up +23% this year, to all‐time highs, and well ahead of the +10‐15% gains other U.S. indices are up. The Transportation’s strength underscores investors’ high expectations for a rebounding economy that will benefit companies carrying goods and raw materials as Americans get back out and spend again. And spend they did. The U.S. reported a +6.4% first quarter GDP growth fueled by a surge in personal consumption, to a +10.7%annual rate, the second best rate of spending since the 1960s. Corporate earning have maintained their impressive growth, now running at +45.7% with about 60% reported.

Digits & Did You Knows

RENT IS DUE —The median asking monthly rent rose to$1,463 in March across the country’s 50 largest markets, according to a report from Realtor.com. That’s a +1.1%increase on an annual basis and the first month where the pace of rent growth increased since last summer, the report showed. The Covid‐19 vaccine rollout and rising employment are prompting more people to move back into cities and look for apartments to rent (source: Realtor.com, WSJ).
STICKER SHOCK — The median sales price of existing homes sold in the U.S. was $329,100 in March 2021, an all‐time high both on a nominal basis and on an inflation‐adjusted basis (source: National Association of Realtors, BTN Research).

Click here to see the full review.

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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 04.23.21

April 26, 2021

The Bottom Line

● The S&P 500 Index was just 0.13% away from making its fourth consecutive weekly record high. Trading was choppy during the week despite strong economic data and stellar earning results with more S&P 500 companies beating EPS estimates than average, and beating those EPS estimates by a wider margin than average.
● After rising for essentially every week in February and March, the yield on the 10‐year U.S. Treasury bond has fallen for each of the three full weeks in April, going from a closing high of 1.722 on 4/2 to 1.558 on Friday 4/23. That has helped the Bloomberg Barclays US Aggregate Bond Index to gains in three of the last four weeks.

Missed it by that much…

U.S. stocks just missed making record highs for the fourth Friday in a row following a week of choppy trading. The S&P 500 rallied more than +1% on Friday after a sharp drop on Thursday on news that the Biden administration planned to nearly double capital gains taxes on high income earners. The rebound on Friday was buoyed by new highs in both the services and manufacturing Markit Purchasing Managers Indexes (PMIs) suggesting faster and broader growth in the second quarter than was already expected. The PMI data underscored strong economic activity data from the Chicago and Kansas City Fed regional economic surveys. New home sales were also very strong, as was the Conference Board’s Leading Economic Index (LEI). Meanwhile, it is shaping up to be a stellar earnings season, particularly for cyclical sectors like banks and retailers. According to The Earnings Scout the new blended first quarter earnings growth estimate for the S&P 500 is +24.2% from last year. At the beginning of the year, Wall Street was only expecting +12.2% growth for the first quarter. FactSet reports that 84% of S&P 500 companies have beaten estimates so far, which would tie the highest earnings beat rate since FactSet began the data in 2008.

Digits & Did You Knows

GROWING DEMAND, LAGGING SUPPLY —Inflation, as measured by the Consumer Price Index (CPI), was up +0.62%in March 2021, the highest monthly rate recorded in the United States since June 2009 (almost 12 years ago). There have been just 6 months in the last 30 years (360 months) when monthly U.S. inflation has been greater than +0.62%(source: Bureau of Labor Statistics, BTN Research).
DO YOU HAVE ANY PEANUTS? — 1.49 million travelers went through TSA screening at U.S. airports last Thursday 4/15/21, up from just 95,085 screened passengers on 4/15/20, but still down from 2.62 million passengers on 4/15/19 (source: Transportation Security Administration, BTN Research).

Click here to see the full review.

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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 04.16.21

April 19, 2021

The Bottom Line

● For the third week and a row the S&P 500 and Dow Jones Industrial Average both closed at new record highs. Earnings and economic data continues to come in stronger‐than‐expected.
● After being relatively flat for the last two weeks, the yield on the 10‐year U.S. Treasury bond fell 8 basis points, its largest weekly decline since June 2020, partly due to renewed buying from overseas, particularly Asia.
● After subpar economic activity in February, which was negatively impacted by severe winter weather, the U.S. economy has clearly shifted into high gear in March and April. Retail sales, manufacturing, and housing all jumped.

Better than expected… all around

First quarter earnings season kicked of this week and so far companies are reporting numbers way above what Wall Street expected. With 9% of the S&P 500 reporting earnings so far, according to FactSet about 81% of companies have beaten estimates – and with an earnings growth rate of 30.2% so far. Its still very early, but if that holds up, it would mark the best earnings season since Q3‐2010. It was a busy week for economic reports and they too were much stronger than expected. Retail sales boomed in March, new jobless claims plunged, and April Empire State and Philly Fed manufacturing surged. Heck, even state revenues fared better than expected in a pair of studies, one by The Pew Charitable Trusts’ state fiscal health initiative and one by the Federal Reserve Board of St. Louis. It’s no wonder that the S&P 500 is at a record high and up +11.4% YTD through Friday 4/16/21. The index has set 23 record closing highs this year and is up for four straight weeks now. The Dow Jones Industrial Average also set a record high on Friday after crossing 34,000 for the first time on Thursday. After pausing the past two weeks the yield on the 10‐year U.S. Treasury fell 8 basis points, its largest weekly decline since last June.

Digits & Did You Knows

APRIL 14th IN HISTORY —On April 14th in 1865 President Lincoln was assassinated. In 1912 the Titanic hit an iceberg and sank. In 2021, cryptocurrency exchange Coinbase Global made its stock market debut, exceeding a market cap of$100 billion before falling back to a first‐day closing valuation of $86 billion (source: Crossing Wall Street, CNBC).
CLOSE THE DOOR? — 32% of Americans believe that foreign imports shipped into the U.S. represent a “threat” to the U.S. economy. The Port of Los Angeles and the Port of Long Beach, just 3 miles apart on the West Coast, are the 2 busiest American ports by total container trade (source: Gallup’s 2021 World Affairs survey, iContainers.com, BTN Research).

Click here to see the full review.

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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.

 

 

Uncategorized

Q1 Quarterly Client Update

April 16, 2021

What a Difference a Year Makes

This time last year, we were all forced to make drastic changes to our everyday lives — working from home, acting as educators to our children and grandchildren, and settling in for the unknown long-term. Fortunately, there is finally optimism and a shred of pre-pandemic normalcy. As the first quarter of 2021 closed, we are just over a year removed from the Federal Reserve’s (Fed) announcement of the intent to provide significant liquidity to the markets, restoring confidence, and seeing the market bottom on March 23, 2020. One-year returns from 03/31/2020 to 03/31/2021 are remarkable, led by small- and mid-sized companies, as measured by the Russell 2000 and S&P MidCap 400, gaining +94.85% and +83.46%, respectively. While large company indexes lagged, the +56.35% return on the S&P 500 and +72.04% gain on the tech-heavy NASDAQ over the same period are nothing to sneeze at. Given the global capital market synchronization, factored with a weaker dollar, it should not be surprising that the foreign markets turned in solid gains over the last year of +44.57% and +58.39% on the MSCI EAFE and the MSCI Emerging Market Index, respectively. Though the yield on the 10-Year Treasury has more than tripled since bottoming in 2020 (prices and yields have an inverse relationship; as yields go up, bond prices go down), the Bloomberg Barclays U.S. Aggregate Bond Index still delivered a +0.71% return.

To the Moon?

While equity markets ended the quarter in positive territory, the road to gains was anything but smooth. Late January brought about the ‘Reddit Revolution,’ whereby hordes of retail investors banded together in taking a fight to Wall Street. Their primary focus was small companies with extreme levels of short interest, such as GameStop (GME) and AMC Entertainment Holdings (AMC), intending to send the stock prices ‘to the moon.’ What started as a message board for people to invest their stimulus money morphed into a movement, pitting Main Street against Wall Street, albeit short-lived. Investors’ attention quickly turned to the spike in longer-dated yields, prompting fears that inflation will exceed the Fed’s target of 2%, forcing them to a reduction in their accommodative policy sooner than planned. These fears essentially caused the general market to move in the opposite direction of yields day by day (if yields went up, equities went down, and vice versa). The market’s yield sensitivity sent the tech sector reeling, pushing the NASDAQ into correction territory (10% or more contraction). A rotation out of large- and mega-cap companies into smaller companies continued to lead equity markets higher, with S&P MidCap 400 and Russell 2000 generating +13.47% and +12.70%, respectively. While not as impressive, the S&P 500 delivered a solid +6.17% return, and the NASDAQ, even with contraction, brought up the rear gaining 2.78% year-to-date.

Uneven COVID containment across emerging market countries, along with varying degrees of inoculation success and rising US yields, saw the MSCI Emerging Market Index experience increased levels of volatility yet delivered a positive return of +2.29% in the first quarter. Conversely, foreign developed countries (primarily Europe) continue to lag the US in vaccine rollout progress and suffer from tighter mobility restrictions which threaten the near-term recovery. Yet, the MSCI EAFE Index gained +3.48% for the period. A weakening US dollar served as a tailwind for investments outside of the US in 2020, but thus, far in 2021, the dollar has strengthened, thereby dragging down foreign markets’ performance.

A third major Congressional COVID Relief Package coupled with extraordinary monetary support from the Fed and easing of COVID restrictions caused a lift in growth projections – and higher inflation expectations. Consequently, the bond market, with yields on the 10-Year Treasury up +0.84%, closed the quarter at 1.75% resulting in equity investor anxiety. This inverse relationship bond prices have with yields booked a return on the Bloomberg Barclays U.S. Aggregate Bond Index down -3.37% for the quarter.

From Cold to Hot?

After the February freeze, the economy is heating up. With $600 checks from the late December Congressional stimulus package in hand, consumers started spending, as evidenced by the revised 7.6% jump in Retail Sales experienced in January, the fastest pace in seven months. Retail Sales contracted in February, as did other economic indicators resulting from the Arctic freeze that essentially closed activity for multiple weeks during the month. Strong January sales, along with another round of stimulus checks in mid-March, accelerated reopening, and accumulated savings, should boost spending for March and beyond. Given that the consumer accounts for roughly 70% of our economy’s output, spending is a significant driver for economic growth. The composite Purchasing Managers Index (PMI) has accelerated recently, well beyond pre-COVID
levels, registering all-time highs of 63.8. A reading above 50 indicates expansion, while a number below 50 indicates contraction; composite PMI comprises Manufacturing and Services PMI. The service-oriented industries sector, including leisure, travel, hospitality, dining, etc., shut down in March of 2020, resulting in a massive contraction in services. Yet, as mandates were lifted or loosened, these sectors’ activity picked up significantly, rising to levels we have not seen in nearly
two years. Since our economy is primarily services-oriented, it is clear that our services sector’s health is essential to a sustainable recovery. Fiscal COVID relief and accelerated economic activity have led many to increase their first quarter and full-year GDP outlooks. Bloomberg forecasts a first quarter acceleration of +6.0% GDP output and 7.7% for the year, with the
second and third quarters clocking in at 11% and 10%, respectively. The last time the economy grew at a similar pace was following the 1981-82 recession when growth accelerated at 7.9% in 1983.

One area of the economy still suffering impairments is the labor market. The April 2020 unemployment rate peaked at post-Great Depression highs of 14.7%. While the headline unemployment rate has continued to recover, with March’s unemployment rate falling to 6.0%, the bottom line is that while momentum in the labor market is developing, it is still fractured. First-time unemployment filings are averaging more than 700,000 per week and remain elevated over the 2008 Great Financial Crisis’s peak. Returning the labor market to pre-pandemic maximum employment levels is one of the Federal Reserve’s primary objectives, a requirement before consideration of raising rates. By their admission, a long road ahead remains. The Fed’s recent forecasts suggest that hiring will continue to accelerate as vaccines are administered, pushing the unemployment rate down to 4.5% by the end of the year. February gains of 468,000 were restrained by the month’s arctic weather, but March saw a spike of 916,000 new jobs added. This trend expects to continue, and we would not be surprised to see more than a million jobs added over each of the next several months. Given the economy needs an average run rate of 400,000-500,000 new jobs per month to approach an unemployment rate near 4% by the end of 2022, the significant, expected gains are undoubtedly welcome.

Economic and market indicators are often presented as year-over-year statistics, so as data releases in the coming months, they may seem extraordinarily large due to the base effect. Essentially many economic indicators were in the basement this time last year which suggests data today may appear inflated from reality over the next several months. Arguably no data point has been more debated and in the spotlight than inflation. Inflation measures the rate of increase in prices of goods over a given period, and high inflation levels can damage productivity and economic growth. Last year prices fell in March and April and remained low in May. As such, the year-over-year increases for March through May will likely appear inordinately high. Since the Fed is targeting an average inflation level of 2%, these reports are critical to monitor and decipher, which may prove more difficult when accounting for the recent $1.9 trillion pandemic relief package. Given significant monetary and fiscal stimulus provided over the last year and supply chain disruptions resulting from the pandemic, it is hard to envision an outcome where inflation does not rise. Some would suggest that we are positioned for hyperinflation. In contrast, others like the Fed and Treasury Secretary, Janet Yellen, believe we will experience higher inflation levels, though the elevated levels will prove transitory and will ultimately normalize. They have been vocal about their expectations and the impact of the base effect over the coming months. While they have communicated their expectations surrounding the illusory readings expected, we would not be surprised if some investors still view elevated readings as confirmation that inflation is surging, which could lead to market volatility in both equities and bonds.

The rest of the Quarterly Update covers the Federal Reserve, Congressional Stimulus, and other Implications moving forward. Read more.

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The preceding commentaries are (1) the opinions of Chris Osmond and Eric Krause and not necessarily the opinions of PCIA, (2) are for informational purposes only, and (3) should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.

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

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Lisa received her Bachelor of Science degree from Missouri State University and is a member of Women in Financial Services. She loves to travel to new places in her free time, and her favorite place to travel is overseas where her grandson lives. Lisa also loves music and enjoys playing the piano or attending live music events with her husband.

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Advisory services offered through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”). Securities offered through Private Client Services (“PCS”), member FINRA/SIPC, and any related communication on this website is strictly intended for individuals residing in the states of: AL, AK, AZ, AR, CA, CO, CT, DC, FL, GA, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WA, WI, WY. PCIA and PCS are separate entities and are not affiliated.

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Matt graduated from Kansas State University with a B.S. in Animal Science. When Matt isn’t working, you can catch him hunting, fishing, or spending time with his daughter who shows livestock.

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

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Wyatt graduated from Baylor University with a degree in finance and economics. Today, he is able to use what he studied in college to better serve clients along the way.

Wyatt played football at Baylor, so when he’s not in the office, he loves keeping up college football. Aside from that, he enjoys outdoor sports, fishing and hunting.

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

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