​Hope all is well.  Despite mostly positive economic indicators and strong earnings results, the major stock indexes were slightly negative. For the S&P 500 and the Dow, the modest setback snapped a four-week string of gains that had pushed the indexes to record highs.  Earnings season continued to exceed expectations. Profits at companies in the S&P 500 were expected to rise 33.8% as of Friday, but news headlines on Thursday caused a down draft. I have broken down this week’s news using quotes from the movie Office Space (a worthwhile watch if you have never seen it).

​Like Milton’s HR department in the movie who moves his desk, stops paying him and takes his stapler. The government keeps taking away more tax dollars from people hoping the markets will not object.  On Thursday, the market did take notice. U.S. stocks’ biggest move of the week came on Thursday, when the S&P 500 dropped more than 1% in less than an hour. The drop was triggered at least in part by reports that President Biden is considering a proposal to sharply increase capital gains tax rates for wealthy taxpayers—the increase was expected to be much less and caught the market flat footed.  Don’t be surprised if we see more volatility in the coming weeks as markets fully digest what is being proposed.

We got conflicting on the COVID front like the paper jam in Office Space. On one hand, U.S. seems fine as Americans continue to get vaccinated and COVID rates drop. On the other, COVID-19 pandemic is surging in other parts of the world.  India on Thursday reported the world’s biggest one-day rise in new infections.

​Bitcoin stumbled with a case of the Mondays.  It was an unusually volatile week for bitcoin, as the price of the cryptocurrency fell below $50,000 on Friday after climbing to $62,000 just a week earlier. Much of the weekly decline came during a span of about 20 minutes. Bitcoin crossed $60,000 in March for the first time after starting 2021 at around $29,000. 

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​Hope all is well.  Good economic news propelled stocks to new highs last week, with equities, bonds and commodities all rallying. The Dow surpassed 34,000 for the first time ever as all three major indexes finished up more than 1% on the week.  I broke down this week's news using cartoons.

​Inflation is starting to rise.  Consumer Price Index (CPI) rose 0.6% in March from February and has increased 2.6% from year-ago.  Energy was a major factor behind the jump, as gasoline prices have risen almost 23% year-over-year. The jump in gas prices comes just as people are starting to get back in their cars and go places again.  This could eventually cause consumer spending to cool.  The pickup in consumer spending has been significant of note clothing stores (+18%) as well as restaurants and bars (+13%) suggests that the easing of restrictions and progress in vaccinations are leading to a resumption of typical spending habits.  The increased spending has fueled this latest leg of the market rally.  Inflation is unlikely to derail spending in the near term as there is still pent up demand but it bears monitoring. 

Earnings season kicked off S&P 500 earnings are expected to grow almost 25% in the first quarter, the strongest growth rate since 2018.  Banks were first up to report first-quarter results. Corporate profits for all 13 banks that reported comfortably exceeded estimates by 36% on average.  Economic and corporate fundamentals will continue to improve beyond the coming quarter and year, but the rate of change will slow.  Expect the market to be a little more volatile over the next couple of months with  pullbacks likely to become more frequent.   That does NOT mean you should get out of stocks. Stocks remain the best investment for the growth piece of your portfolio as the market longer term should remain on an upward trajectory despite increased volatility.  What it means is if you have money in stocks that you're planning to spend before the end of the year now might not be a bad time to take some risk off the table.

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Hope all is well. Stocks hit new highs on strong data. Most of the major benchmarks moved steadily higher to record highs, although the small-cap Russell 2000 Index recorded a modest loss. The technology-heavy Nasdaq Composite Index outperformed the broad market S&P 500 Index but stayed below its February peak. Tech shares also regained the lead within the S&P 500 during the week, helped by solid gains in Apple and Microsoft—which together account for roughly 40% of the sector’s market capitalization. Casino and cruise line shares were also especially strong, while energy stocks lagged as oil prices pulled back early in the week. Growth stocks handily outperformed value shares, narrowing the performance gap for the year to date. In honor of Earl Simmons aka DMX who passed away on Friday I have chosen to break down this week's news and analysis using songs and lyrics from my favorite DMX album Flesh of My Flesh Blood of My Blood.

It's All Good
The Labor market it's all good it's alright. The Labor department reported that employers added 916,000 jobs in March, well above consensus estimates of around 650,000, and the most since last August. The reopening of bars and restaurants and the rebound in travel were clearly at work, with 280,000 jobs added in leisure and hospitality industries. February job openings, reported Wednesday, hit almost 7.4 million, the highest since January 2019. Give the overall strength in March the markets were unphased when the weekly jobless number came out, just like the trash on a Thursday. Thursday’s report that initial jobless claims hit their highest level (744,000) in three weeks. Weekly jobless claims still remain in a broader downtrend. This indicates the near-term improvement in employment conditions won't be completely smooth, as vaccine distribution and regional/industry restrictions proceed unevenly.

The Omen
Fed Chair Jerome Powell stressed that the global economy would remain fragile until the pandemic is brought under firm control and that the U.S. recovery remained “uneven and incomplete.”  The Fed will hold (rates) down and (they) mean that for real. I suspect that higher inflation readings this year will raise the market's anxiety level over the timing of the Fed's pivot toward raising rates.  I  don’t expect inflation to run hot enough that the Fed is forced into that this year, but the higher inflation readings will be a source of volatility, nonetheless. Fortunately, Fed policy will remain more helpful than harmful for some time, with rate hikes unlikely to occur in the coming year.
 
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