TodayMarket futures are drifting higher as international markets advance, as investors weigh the results of some of the world’s biggest banks. Q1 earnings season is upon us and GS is climbing in the pre-market after its revenue beat estimates. JPM is down a little after the bank noted loan demand remains tepid. It’s not exactly the kind of optimistic tone that can lift an entire market. With global stocks hovering near all-time highs, investors are looking to the earnings season for further catalysts, so far they remain unimpressed.
Commodities are broadly higher to begin the day aided by weakness in the U.S. dollar. After a tough start this quarter for the great reflation trade, some investors are beginning to doubt the inflation scare. They’ve been burned enough over the past 12 years buying into the hype that that the great bond bull is dead. No matter how many legitimate reasons you can come up with why it makes sense now, it is hard to overcome the lessons learned through recent history.
Trades favoring economically-sensitive value stocks, steeper yield curves and a rebound in commodities have faltered recently after a stellar first quarter, even after yesterday’s inflation report that saw the headline rate came in “hot” at 2.6%. You would think that this would naturally mean higher bond yields, as investors acted to protect themselves against higher inflation and interest rates ahead. Initially yes, but yields then retreated so, of course, exactly the opposite occurred.
Anyone else notice the subtle tick higher in geopolitical risks? Yesterday China flew 25 military jets into Taiwanese air space yesterday, increasing concerns of an incursion. Ukraine also is preparing for a potential conflict as Russia has moved 80k troops to its border, raising concerns of an invasion. While we’re not qualified to weigh in on these issues, we will note that the market has taken notice. The S&P Aerospace and Defense sub-index is up over 12 percent over the past couple months and some names like Lockheed Martin have shot up the past month after months of relative underperformance to the broad market.
Lazard Asset Management put together a great outlook for
Emerging markets. They remain fairly optimistic for the regions, especially once the smaller countries begin to receive more vaccines. Exhibit 2 is interesting - Check out Canada on there - Clearly something wrong with our deployment system.
One might ask - How long can this
chip shortage in the globe really go on for? Check out this outlook from PIMCO deciphering what is driving it and any opportunities and risks that they see on the horizon.
Diversion: Still don't really understand NFT's? Check out this
explanation video and thoughts from an Artist who hit it very big.