Economic Monitor – Weekly Commentary
by Scott J. Brown, Ph.D.

Spending, Deficits, and Debt

April 9, 2021

On Monday, the Treasury Department is expected to report a March budget deficit of about $658 billion, bringing the 12-month total to nearly $4.1 trillion, about 19% of GDP. Proponents argue that the added spending, with more to come, will help to ensure the recovery. Critic

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Investment Strategy
by Larry Adam
Chief Investment Officer, Private Client Group

Weekly Headings

April 9, 2021

Key Takeaways

  • Important to put index milestones into perspective

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    Weekly Market Snapshot

    April 9, 2021

    Market Commentary
    by Scott J. Brown, Ph.D., Chief Economist

    The ISM Services Index rose to 63.7 in March, from 55.3 in February, partly reflecting a rebound from bad weather. The report showed business activity, new orders and employment rising at a faster pace, while supplier delivery times lengthened further and input price pressures continued to rise. In its revised World Economic Outlook, the IMF raised expectations for global growth (+6.0% y/y), led by stronger expectations for the U.S. (fueled by the faster arrival of vaccines and further fiscal stimulus). The Producer Price Index jumped 1.0% in March (+4.2% y/y), reflecting an 8.8% increase in wholesale gasoline prices.

    The FOMC minutes from the mid-March policy meeting showed most Fed officials anticipating a transitory increase in inflation, while “the economy remained far from the FOMC’s longer-run inflation and employment goals.”

    Next week, the March CPI report (Tuesday) should show a year-over-year gain of about 2.4%, reflecting “base effects” (a rebound from the low figures of a year ago). Looking further ahead, the April CPI (to be reported May 12) should show a year-over-year gain of over 3% (as the April 2020 decline of 0.7% rolls off the 12-month calculation) – that does not mean that inflation is getting out of hand. The March reports on retail sales (Thursday), industrial production (Thursday) and residential construction (Friday) should each show a strong rebound from the effects of February’s bad weather.


    Indices

      Last Last Week YTD return %
    DJIA 33503.57 32619.48 9.47%
    NASDAQ 13829.31 12977.68 7.30%
    S&P 500 4097.17 3909.52 9.08%
    MSCI EAFE 2262.69 2194.08 5.36%
    Russell 2000 2242.60 2183.12 13.56%

    Consumer Money Rates

      Last 1 year ago
    Prime Rate 3.25 3.25
    Fed Funds 0.07 0.05
    30-year mortgage 3.30 3.34

    Currencies

      Last 1 year ago
    Dollars per British Pound 1.3735 1.246
    Dollars per Euro 1.1914 1.093
    Japanese Yen per Dollar 109.26 108.49
    Canadian Dollars per Dollar 1.256 1.398
    Mexican Peso per Dollar 20.096 23.570

    Commodities

      Last 1 year ago
    Crude Oil 59.60 22.76
    Gold 1758.20 1752.80

    Bond Rates

      Last 1 month ago
    2-year treasury 0.16 0.14
    10-year treasury 1.68 1.57
    10-year municipal (TEY) 1.54 1.68

    Treasury Yield Curve – 04/09/2021

    Chart

    As of close of business 04/08/2021


    S&P Sector Performance (YTD) – 04/09/2021


    Chart

    As of close of business 04/08/2021


    Economic Calendar

    April 13  —  Consumer Price Index (March)
    April 14  —  Import Prices (March)
     —  Fed Beige Book
    April 15  —  Jobless Claims (week ending April 10)
     —  Retail Sales (March)
     —  Industrial Production (March)
    April 16  —  Building Permits, Housing Starts (March)
     —  UM Consumer Sentiment (mid-April)
    April 26  —  Durable Goods Orders (March)
    April 27  —  Real GDP (2Q20, advance estimate)
    April 28  —  FOMC Policy Decision
    May 7  —  Employment Report (April)

     

    All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

    The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

    Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business April 8, 2021 .

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