Patients Patience

Patients patience.  Stocks ended the week on a flat note on Friday, unable to hold on to earlier session gains.  Investors just can’t shake the fear of rising bond yields and higher inflation.

N O T E W O R T H Y

Can’t get enough of the stuff.  

You are scrolling through your Facebook, Instagram, LinkedIn, Twitter, or whatever feed and you see pictures of friends and colleagues exclaiming victory after receiving a dose of the vaccine.  You yourself may have gotten vaccinated, you may have signed up but have yet to receive “the call”, or your eligibility group may be on deck.  Ok, so maybe you watch the early morning news and see pictures of the long lines of willing vaccine recipients in front of the Major League Baseball Stadium in your city.  Last week, a report cited research from Israel that concluded that the Pfizer-BioNtech shot was 85% effective after just the first dose.  Over the weekend, WHILE YOU LONGED FOR SPRING, another report surfaced stating that single dose effectiveness could be as high as 90%.  Those are outstanding numbers for Wall Street where we consider 50.00001% pretty good odds, and for all other streets, those numbers are pretty good as well.  To date, only one company has come out with a single dose solution (J&J), and though it is expected to be less effective, the logistics of a single shot and its transportability are considered windfalls, especially for regions that have less access to infrastructure… and super-cooling freezers.  A big challenge for the vaccine rollout has certainly not been the willingness of patients, as once thought, but rather the logistics of getting enough supply to meet the demand.  The requirement of two shots complicated an already-complex logistical network… never mind the bad weather gripping the US. That said, the Israeli research means that more people can get protected even more quickly and effectively.  Let’s get into some more numbers.  In the US, the COVID-related hospitalization rate per 100,000 people spiked last December following the onset of colder weather and Thanksgiving.  Another spike followed the Christmas Holiday. The high water mark was around 19%!  Since that last spike, those rates have rapidly declined.  The latest numbers from the CDC suggest that those rates are now lower than they were in late March of last year as the virus first gripped the nation.  We are not nearly out of the rough water yet, however.  New weekly COVID cases remain high, BUT the rate of change on those new cases is slowing markedly and the positivity rate, which also spiked following the holiday season, has since, fallen as well.  So, if we observe the trends of those numbers, they are negative… which is positive for our health, the economy, and the markets.  In addition to the growth in inoculations and negative trends, the US is on the verge of receiving another massive influx of relief capital from the stimulus bill being worked out by Congress now, which can be as high as $1.9 trillion.  Economic numbers suggest that US households saved much of the stimulus received to date, amounting to pent-up demand waiting to be unleashed once the World reopens anew. With earnings season winding down over the next 2 weeks, the results so far show that companies are getting healthier as well.  Nearly 80% of S&P500 companies that have announced thus far have beaten Wall Street Estimates.  According to analysts, earnings are likely to have risen by around +3% for the 4th quarter.  Those same forecasts were looking for a -9% drop just a few months back.  So, there is some light at the end of the tunnel.  A quick word of caution.  The markets have clearly not worked out all the details of the recovery as is evidenced by index performance of the past week, despite all the positive news.  Overall however, stocks have already factored in a rosier future.  Bonds are beginning to factor in the future growth as well with long term bond yields approaching levels not seen since last February.  Sectors, styles, and companies are all vying for the title of “best actor in a recovered world.” There is no clear winner yet and the race is still on, so stay focused and stick to your long term strategy.

THE MARKETS

Stocks gave up earlier gains on Friday to close mixed as the continuing rise in treasury yields prompted selling in growth stocks. The S&P500 slipped by -0.19%, the Dow Jones Industrial Average broke even, the Russell 2000 Index climbed by +2.18%, and the Nasdaq Composite Index added +0.07%.  Bonds declined and 10-year treasury yields ticked up by +4 basis points to 1.33%.

NXT UP

– Chicago Fed National Activity Index (Jan) is expected to have slipped to 0.50 from 0.52.

– The Leading Index (Jan) may have risen by +0.4% compared to Decembers +0.3% gain.

– Dallas Fed Manufacturing Activity (Feb) is expected to have fallen to 5.0 from 7.0.

– This morning both DISH and Discovery Inc beat estimates. After the bell announcements include Diamondback Energy, ZoomInfo, Williams, Palo Alto Networks, Transocean, Occidental Petroleum, and Marathon Oil.

– The week ahead will feature a sizable collection of earnings along with housing numbers, Consumer Confidence, GDP, Personal Consumption, Personal Income/Spending, PCE Deflator, and University of Michigan Sentiment.  Please refer to the attached economic and earnings calendars for details.