Straight Talk About Inflation | LPL Daily Market Update

Thursday, April 1, 2021

Top Story

Expect contained inflation long term

It’s tempting to predict runaway 1970s inflation as an April Fools’ Day joke, but we don’t want to upset our friends in the compliance department, so we shoot straight about inflation in today’s LPL Research blog, available today at 12 p.m. ET.

Daily Insights

U.S. stocks opened modestly higher while the Nasdaq 100 Index looks to continue this week’s outperformance.

  • Longer-dated Treasury yields fell as investors continue to weigh the prospects of President Joe Biden winning approval for his $2.25 trillion infrastructure plan.
  • European markets are broadly higher in midday trading.
  • Technology stocks propelled Asian markets overnight with Hong Kong outperforming.

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.

Jobless claims underscore volatility in the labor market

  • 719,000 Americans filed for unemployment insurance last week according to the Department of Labor, above Bloomberg consensus forecasts calling for 675,000.
  • Jobless claims from the prior week were revised lower by 26,000, while continuing claims from the prior week were also revised lower by 30,000.
  • While weekly jobless claims have remained volatile, Friday’s nonfarm payrolls release will provide a clearer picture of the U.S. labor market. Bloomberg consensus estimates expect the US economy to have added 650,000 jobs in March.

U.S. fiscal effort far outpaces Europe and Japan

  • S. stimulus to combat the pandemic has reached 25% of GDP, according to International Monetary Fund data cited by Ned Davis Research.
  • S. stimulus is more direct than Europe, including more grants and fewer loan guarantees, and is therefore more impactful.
  • Similar calculations from the Organisation for Economic Co-operation and Development (OECD) based on pandemic-related government borrowing as a percent of GDP puts the U.S. (13%) well ahead of Europe (7%) and Japan (4%).
  • Massive stimulus and one of the most successful COVID-19 vaccine rollouts in the world set the stage for historic U.S. economic growth in 2021.
  • We believe U.S. GDP growth is likely to outpace that of Europe, Japan, and the developing world in 2021. Our U.S. and global GDP forecasts are currently under review.

Technical update

Growth stocks led a Nasdaq bounce yesterday, as both the Nasdaq Composite and tech sector gained 1.5%. Recent laggards outperformed, including software, semiconductors and biotechnology stocks, which all gained more than 2.5%. The 100-day moving average continues to act as support for the Nasdaq, and can currently be found at 12,942, while resistance lies at 13,607.

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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