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Even though major indices were flat last week, there was plenty of good news to go around. First up, the U.S. economy grew a strong 6.4% in the first quarter of 2021. That put the world’s largest economy within 1% of pre-pandemic levels in late 2019.

Second, household incomes grew at a record 21.1% in March. The largest monthly increase in U.S. history going back to 1959 largely reflects the effects of the $1,400 checks from the government’s recent stimulus package. Not surprising, consumer spending increased 4.2% in March according to the Commerce Dept. The increase in spending was focused mostly on big-ticket items.

They say a picture is worth a thousand words. If that’s true, the one below from FactSet is worth even more. The S&P 500 is reporting the third-highest net profit margin for the first quarter of this year since 2008. We all know earnings/profits are what drives the market. It’s no wonder equity markets hover near all-time highs.

Some analysts are still concerned about inflation. I’ve written about it in the last few market commentaries, however, the Fed believes the recent spike in interest rates is due to supply chain shortages that are largely caused by the effects of the pandemic. The more the economy opens-up and hiring continues to increase, these shortages are expected to work themselves out.

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The Markets and Economy

Customers may be returning to bars and restaurants but workers aren’t rushing back. A combination of fear of Covid-19, changing professions and/or remaining on unemployment benefits is proving a challenge for the industry. Incentives are being offered such as signing bonuses and free college tuition to lure workers back.
According to the National Association of Realtors, the median sales price of an existing home sold in the U.S. was $329,100 in March 2021. That was an all-time record both on a nominal basis (not adjusted for inflation) and an inflation-adjusted basis.
The Consumer Electronics Show will be held in person in 2022. The world’s largest consumer-electronics exhibition went virtual due to the pandemic. Las Vegas has been home to the show for years and is looking forward to the return and financial benefits that accompany the trade show.
Foot traffic at a sample of 52 malls in March was up 86% from a year earlier. While that was 24% lower than in March 2019, mall owners are optimistic that their business has turned a corner.
Tesla made more money selling digital currency and carbon-emissions offsetting credits than selling cars. The electric car manufacturer booked a $101 million profit from the sale of bitcoin and $518 million profit from other auto makers who buy regulatory credits to offset federal emission mandates. Those two transactions help keep Tesla out of the red for the quarter.
Durable-goods orders (goods lasting at least three years) rose 0.5% in March as the U.S. recovery fueled manufacturing demand that has growing since last fall. Orders have increased 10 out of the past 11 months.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc., and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.

David Kover on May 3rd, 2021

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