Gallon-sized Improvement in Employment | LPL Daily Market Update

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Wednesday, March 30, 2021

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Gallon-sized Improvement in Employment

In the latest LPL Street View, Research Chief Investment Officer, Burt White, makes the case that even though unemployment claims are at their lowest level since the pandemic started, we still have a long way to go to reach pre-pandemic levels.

Daily Insights

U.S. stocks opened little changed with the Nasdaq-100 Index taking the lead after underperforming on Tuesday.

  • European markets are little changed in midday trading despite the United Kingdom posting better than expected economic growth in the fourth quarter.
  • Asian stocks were lower overnight with banks weighing on Japan’s Nikkei 225 as further exposure to the Archegos Capital meltdown is revealed.

LPL Financial closed on Friday, April 2, 2021

LPL Financial will be closed along with the stock market for the observation of Good Friday. The bond market will be open a half day. There will be no Morning Call, Daily Market Update or blog post.

April is almost here

The S&P 500 Index historically has done quite well in April, making it one of the best months of the year. As we soon turn the calendar to April, here are some things to consider:

  • Stocks have been higher in April 14 of the past 15 years.
  • April is the best month of the year for stocks over the past 20 years.
  • April is the second best month of the year over the past decade and since 1950 (only November is better).
  • April ends the seasonally best six months of the year, which then opens the door to the “Sell in May” period.
  • For more about this trend, please read today’s LPL Research blog.

Stocks and inflation

As we continue Inflation Week here at LPL Research, one question is: How do stocks do based on inflation? It appears stocks do much better when inflation is low or trending lower. Consider these statistics:

  • If inflation is between 0-2%, the S&P 500 gains 10.9% annually.
  • If inflation is above 6%, stocks are up only 3.3%.
  • If inflation is trending lower, then stocks are up 18.8%.
  • If inflation is trending higher, then stocks are up only 6.4%.
  • We discuss this in more detail on the LPL Research blog, available today at 12pm ET.

Infrastructure stimulus details coming today

President Joe Biden is set to propose +$2 trillion of spending over the next eight years on infrastructure. Highlights of the Phase 1 proposal include:

  • Focus on roads, bridges, airports, water-delivery and utility projects, broadband, and supply chain R&D.
  • Some of the funding will come from 15 years of higher taxes, including moving the corporate tax rate up to 28% from 21%.
  • Infrastructure is something former President Trump ran on five years ago, so this should appeal to both sides, but Democrats are still expected to use reconciliation to bypass Republicans.
  • Phase 2 details are expected over the coming weeks. This will include health coverage, expanded child tax benefits, and paid family leave.

 Technical update

Large cap indexes fell yesterday, though the Russell 2000 Index bucked the trend and gained 1.7%. Consumer discretionary, financials and industrials were the only sector gainers for the day. Looking at the Nasdaq Composite, the growth-heavy index remains in a range with resistance at 13,607 and support at 12,397.

COVID-19 news

The United States reported 62,000 cases on Tuesday, up 9% from Tuesday last week, and revealing that cases in the U.S. have been on the rise recently (source: New York Times).

  • The B117 variant remains the primary causes of the rise in cases, but it remains to be seen whether case growth can truly accelerate as 29% of the U.S. population has received at least one dose of the vaccine.
  • The Pfizer/BioNTech vaccine appears to have a near 100% efficacy in preventing symptomatic disease in a study of children 12 years or older (source: WSJ).

Are We on the Brink of an Inflation Crisis?

LPL Research explains why any upticks in inflation will ultimately prove transitory. Learn more in this week’s Weekly Market Commentary.

Let’s Talk About Inflation

On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder examine inflation concerns and explain why they think any increases in inflation will most likely be fleeting.

 

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