19th April 2021

Good morning,
The effect of US fiscal stimulus has been seen almost immediately with a strong rise in US retail sales in March. Consumer sentiment also rose as plans for an infrastructure bill (which is supported by the majority of Americans) starts to firm up. We have spoken on numerous occasions about the effect of policymaker support on markets since the pandemic and some of the data seen last week reaffirms this view. For example, BofAML, report that investors have put more money into the stock market in the last 5 months ($569bn) than the previous 12 years combined ($452bn).

Whilst reading an article over the weekend, I was reminded just how much our industry enjoys a good acronym. For example, some investors have done very well in 2021 by going on a trip to the BEACH (Bookings, Entertainment, Airlines, Cruises, Hotels) as investors are hope for a big bounce once the economy fully reopens. However, not everyone has been so lucky, investors in some ‘bond proxy’ stocks have been left RUSTing (Real Estate, Utilities, Staples, Telecoms) away so far this year. Others might prefer to WATCH (Walmart, Amazon, Target, Costco, Home Depot) the US consumer, as those retail sales numbers above have confirmed.

Despite volatility this year some might make a bet on the BATs (Baidu, Alibaba, Tencent) and invest in some of China’s leading tech firms. If you prefer to stick to US firms, those looking for a bit more of a bite may stick with the FAANGS (Facebook, Amazon, Apple, Netflix, Google). Alternatively, if you focus more on how people pay, rather than what they buy, you might end up investing in some MVPs (Mastercard, Visa, PayPal). Or, if that all gives you a headache, you might just simply conclude that TINA (There Is No Alternative) to equities in the multi-asset space.

Weekly Investment News
Economic data and earnings helped stocks move higher last week as major indexes notched their fourth week of gains in a row. Some of the major US banks kicked off earnings seasons last week, as Goldman Sachs, Wells Fargo, and JP Morgan all beat market expectations for Q1. Whilst the initial price reaction was mixed, it has set a positive tone for the reporting season. The likes of Netflix, Intel, and SAP all report this week.

In terms of economic data, US retail sales surged 9.8% during March which pushes sales higher than they were pre pandemic. In terms of a monthly gain, it is only surpassed by May 2020 which of course was coming on the back of a record decline. There is a consensus that the latest round of stimulus to US households is a direct trigger for the retail sales numbers, and therefore the MoM growth could decline back to a more ‘normal’ level pretty quickly.

Inflation fears continue to linger in the US, as the consumer price index (CPI) rose 0.6% in March, which equates to a 12 month rate of 2.6%. However, policymakers continue to point towards the low base and strong rally in energy prices in assuaging short term data concerns. Weekly jobless claims were at 576,000 which was well below expectations. Conversely, consumer sentiment missed consensus forecasts but did reach its best level since the pandemic broke out. US treasury yields moved lower as stronger demand from overseas investors for new issuance outweighed any concerns about inflation and the knock-on prospects of higher interest rates.

Vaccine news was mixed from the US, as the J&J vaccine distribution was ‘paused’ following blood clot fears. However, there was positive news in terms of supplies from Pfizer and efficacy from Moderna which swung sentiment more positively towards the end of the week. Within Europe, the U.K is beginning to ease lockdown restrictions, whilst in Germany Angela Merkel is pushing for new laws to allow restrictions to be reimposed by federal authorities.

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