Overview: The U.S. markets led stocks higher last week, as the S&P 500 Index recorded its 20th all-time high this year, rising 2.8%. Investors were encouraged by both fiscal stimulus, and the reaffirmation by the Federal Reserve that accommodate monetary policy will continue. The minutes from the last Fed meeting reflected a faster pace of re-openings and a large fiscal stimulus leading to an improved macro outlook, with GDP growth estimates revised upward from around 4% to more than 6% for the year. Meanwhile, interest rates have steadied, with the 10-Year U.S. Treasury yield finishing the week at 1.66%. This week we will look for key economic data with consumer prices (CPI), retails sales, and reports on housing and industrial production released over the course of the week.
Economic update: (from JP Morgan) Recent economic data are showing signs that the U.S. is recovering more quickly from the pandemic than expected. Nowhere is that more notable than in last week’s PMI numbers. Last month the U.S. recorded a strong ISM manufacturing index of 64.7, far surpassing the consensus expectation of 61.5. This 37-year record high is a reflection of robust manufacturing activity driven by strong growth in orders, production and employment, along with increases in prices paid for inputs. The services index also had a stellar March, coming in at 63.7, +8.4% from February, with all 18 service industries exhibiting growth. Previously lagging behind manufacturing, the service sectors appear to finally be catching up. Service sector growth is likely to remain elevated due to pent-up demand, stimulus checks and increased optimism as vaccines are distributed. Internationally, PMIs also painted an optimistic picture, with the J.P. Morgan global composite output PMI coming in at 54.8, a remarkable improvement from its April 2020 low of 26.2. Despite vaccine rollout challenges and further lockdowns, the eurozone composite PMI moved further into expansionary territory at 53.2. China’s composite PMI was also expansionary at 53.1, although it remained lower than at the end of 2020 due to new COVID-19 restrictions. With economic global growth clearly beginning to accelerate, investors may want to consider making portfolio adjustments that recognize the opportunities and challenges presented by a more rapid recovery.
Weekly Returns and Data:
Sources: JP Morgan Asset Management, Goldman Sachs Asset Management
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