Weekly Market Commentary - Chief Investment Office - Brooks Macdonald
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08.03.21 Weekly Market Commentary /1
Chief Investment Office
Weekly Market Commentary
08.03.21
In Summary
The US Federal Reserve (Fed) enters its communication blackout period at a crucial time for
sentiment
Rises in yields continue to drive market volatility
The Senate passes President Biden’s $1.9 trillion US fiscal stimulus package
The US Federal Reserve (Fed) enters its The Senate passes President Biden’s $1.9 trillion US
communication blackout period at a crucial time for fiscal stimulus package
sentiment
The Senate passed President Biden’s $1.9 trillion package
European and US equities had a pretty subdued Friday on Saturday meaning it will now move to the House for
until after the European close, when US equities picked a final vote before going to the White House for Biden’s
up to close higher for the day and the week. Market signature. The economic growth expectations that have
expectations are now for the first Fed rate hike to occur been revised up since November 2020 take account of
in early 2023 and with the Fed now absent due to the both the expected post-COVID-19 recovery but also the
communications blackout, further assumptions could be size of US stimulus. With the package’s total size having
baked in given the policy void1. survived Congress intact, despite some concessions to
Rises in yields continue to drive market volatility moderate Democrats, we are likely to see a supercharged
period of economic growth and short-term inflation.
US 10-year yields are now over 1% higher than their lows
last August2. This is a testament to the dramatic moves seen With the Democrats only able to use the budget
over the last few months. Of course, for context, a circa 1.6% reconciliation process for a fiscal stimulus package once
yield is still on a par with the lowest rates seen in 20193, so in 2021, the instinct was always to ‘go big’. Market concerns
perhaps it’s remarkable that rate expectations had stayed that the support would be too large and therefore
so low in Q4 2020 when more economic optimism was inflationary has been one of several factors being priced
being priced in. In Q2 and Q3 last year, the equity market into equity and bond markets this year. With the package
was drawing its optimism from the low rate environment likely to enter law early this week, and the Fed blackout
and the relative support this gave to high growth equities. period ongoing, rising inflation expectations could be a
Since November 2020, and the first vaccine efficacy trials, major driver of volatility this week.
we have seen a boost to economic expectations which
brought cyclical equities into vogue and has catalysed this
1
Bloomberg, 4 March 2021 (https://www.bloomberg.com/
reappraisal of bond yields. The big question in markets news/articles/2021-03-04/powell-likely-to-push-back-on-
is whether the Fed are comfortable with this rapid rise, bond-market-doubts-over-fed-policy?sref=CZCP1vND)
albeit only to 2019 lows, and to find that out we need to wait
2
Bloomberg, 7 March 2021 (https://www.bloomberg.com/
another week. news/articles/2021-03-07/stimulus-fueled-risk-bounce-
likely-to-come-with-higher-yields?sref=CZCP1vND)
3
Bloomberg, 3 March 2020 (https://www.bloomberg.com/
opinion/articles/2020-03-03/u-s-10-year-yield-breaks-1-on-
highway-to-zero?sref=CZCP1vND)08.03.21 Weekly Market Commentary /2
Economic indicators (week beginning 1 March 2021)
Day Data Release Consensus Prior Actual
Japan Jobless Rate Jan 3.00% 2.90% 2.90%
France Markit France Manufacturing PMI Feb F 55 55 56.1
United States ISM Manufacturing Feb 58.6 58.7 60.8
Italy CPI EU Harmonized YoY Feb P 0.70% 0.70% 1.00%
China Caixin China PMI Mfg Feb 51.4 51.5 50.9
Japan Jibun Bank Japan PMI Mfg Feb F -- 50.6 51.4
Italy Markit Italy Manufacturing PMI Feb 56.8 55.1 56.9
Germany Markit/BME Germany Manufacturing PMI Feb F 60.6 60.6 60.7
Eurozone Markit Eurozone Manufacturing PMI Feb F 57.7 57.7 57.9
Monday
United Kingdom Markit UK PMI Manufacturing SA Feb F 54.9 54.9 55.1
United States Markit US Manufacturing PMI Feb F 58.5 58.5 58.6
Japan Job-To-Applicant Ratio Jan 1.06 1.06 1.1
Japan Capital Spending YoY 4Q -2.00% -10.60% -4.80%
Germany CPI YoY Feb P 1.20% 1.00% 1.30%
United Kingdom Mortgage Approvals Jan 98.0k 103.4k 98.99k
Germany CPI MoM Feb P 0.50% 0.80% 0.70%
Italy CPI EU Harmonized MoM Feb P -0.40% -1.10% -0.20%
United States Construction Spending MoM Jan 0.70% 1.00% 1.70%
United Kingdom Nationwide House PX MoM Feb -0.40% -0.30% 0.70%
Tuesday Germany Unemployment Change (000’s) Feb -10.0k -41.0k 9k
United Kingdom Nationwide House Px NSA YoY Feb 5.50% 6.40% 6.90%
United States MBA Mortgage Applications 46054 -- -11.40% 0.50%
United States ADP Employment Change Feb 180k 174k 117.1k
Wednesday
Italy GDP WDA QoQ 4Q F -2.00% -2.00% -1.90%
Italy GDP WDA YoY 4Q F -6.60% -6.60% -6.60%
United States Initial Jobless Claims 46419 755k 730k 745k
Thursday United States Durable Goods Orders Jan F 3.40% 3.40% 3.40%
United States Factory Orders Jan 1.80% 1.10% 2.60%
United States Change in Nonfarm Payrolls Feb 180k 49k 379k
Germany Factory Orders MoM Jan 1.00% -1.90% 1.40%
Friday
United States Unemployment Rate Feb 6.40% 6.30% 6.20%
United States Trade Balance Jan -$67.4b -$66.6b -$68.2b
Source: Bloomberg, data accessed 08.03.21.08.03.21 Weekly Market Commentary /3
Economic indicators (week beginning 8 March 2021)
Day Data Release Consensus Prior
Japan GDP SA QoQ 4Q F 3.00% 3.00%
Japan GDP Annualized SA QoQ 4Q F 12.60% 12.70%
Monday Germany Industrial Production SA MoM Jan -0.40% 0.00%
Japan GDP Deflator YoY 4Q F 0.20% 0.20%
United States Wholesale Inventories MoM Jan F 1.30% 1.30%
Eurozone GDP SA QoQ 4Q F -0.60% -0.60%
Tuesday Italy Industrial Production MoM Jan 0.80% -0.20%
Eurozone GDP SA YoY 4Q F -5.00% -5.00%
United States CPI MoM Feb 0.40% 0.30%
China CPI YoY Feb -0.30% -0.30%
Japan PPI YoY Feb -0.70% -1.60%
United States MBA Mortgage Applications 38412 -- 0.50%
Wednesday
France Industrial Production MoM Jan 0.60% -0.80%
China PPI YoY Feb 1.50% 0.30%
France Industrial Production YoY Jan -2.40% -3.00%
China Money Supply M2 YoY Feb 9.40% 9.40%
United States Initial Jobless Claims 38777 725k 745k
Thursday Eurozone ECB Main Refinancing Rate 40603 0.00% 0.00%
Eurozone ECB Deposit Facility Rate 40603 -0.50% -0.50%
United States U. of Mich. Sentiment Mar P 78 76.8
United Kingdom Industrial Production MoM Jan -0.80% 0.20%
United Kingdom Manufacturing Production MoM Jan -0.80% 0.30%
Friday
Germany CPI YoY Feb F 1.30% 1.30%
United States PPI Final Demand MoM Feb 0.40% 1.30%
Germany CPI MoM Feb F 0.70% 0.70%
Source: Bloomberg, data accessed 08.03.21.08.03.21 Weekly Market Commentary /4
Asset market performance
As at Friday close YTD
Index Value CR TR CR TR
MSCI UK GBP 1863 2.32% 2.63% 2.93% 3.70%
MSCI USA USD 3731 0.29% 0.31% 1.72% 1.91%
MSCI Europe ex UK EUR 162 0.47% 0.54% 1.44% 1.62%
MSCI AC Asia ex JPN USD 885 -0.26% -0.25% 4.98% 5.12%
MSCI Japan JPY 1161 1.31% 1.31% 5.02% 5.07%
MSCI Emerging Markets USD 1339 0.00% 0.05% 3.72% 3.91%
MSCI World IT USD 435 -2.41% -2.41% -1.90% -1.79%
MSCI World Financials USD 133 2.97% 3.01% 11.22% 11.56%
MSCI World Healthcare USD 303 -1.07% -0.99% -2.91% -2.66%
Barclays Sterling Gilts GBP 297 0.95% -6.62%
GOLD USD 1701 -1.93% -10.42%
WTI Oil USD 66 7.46% 36.21%
MSCI PIMFA Income 0.98% 1.10% -0.20% 0.19%
MSCI PIMFA Balanced 1.09% 1.20% 0.18% 0.54%
MSCI PIMFA Growth 1.15% 1.26% 0.75% 1.09%
Source: Bloomberg, MSCI: please see important information, data accessed 08.03.21.
YTD denotes year to date, TR denotes total return and CR denotes capital return.08.03.21 Weekly Market Commentary /5
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