Week In Review 4-16-2021

Week in Review – Friday, April 16th 2021

1. US economy accelerating

The Federal Reserve released data this week that showed US household wealth reached a new record of $141.7 trillion at the end of June. The increase was boosted by strong stock market gains and rising home values. The overall increase over the first quarter of 2021 was $5.9 trillion or 4.4%, and on a year-over-year basis, the increase was $24 trillion or 20.3% – both historically high levels. The level of growth in US household wealth is truly unparalleled as it has occurred during a period of economic dislocation due to the coronavirus pandemic and suggests the unprecedented levels of monetary and fiscal policies have fortified balance sheets and unlocked higher asset prices.

Source: U.S. Census Bureau via St. Louis Fed

Spending was driven by a reopening economy and another round of stimulus checks. Sporting goods, clothing and food and beverage led the gains in spending and contributed to the best month for retail sales since the May 2020. In other positive news, a Labor Department report showed first-time filings for unemployment insurance plunged to 576,000 for the week ended April 10. That was easily the lowest total since the early days of the Covid-19 pandemic and represented a sharp decline from the previous week’s total of 769,000.

2. March producer prices surprised higher

March producer prices rose by 1.0% month to month, beating the 0.5% consensus. The 4.2% year to year rate was the fastest since September 2011, led by gasoline. Core PPI (ex-food and energy) rose 0.7% vs consensus 0.2% on strength in chemicals, steel, some reopening sectors with the year to year rate 3.1% higher (2.7% expected). Near-term prices are expected to rise as the economy recovers from the pandemic and short-term supply shortages persist. Inflation pressures cause the market to look towards Federal Reserve guidance on interest rates. Chairman Powell spoke this week again about the Fed’s targets of full employment and 2.0% sustained inflation as necessary factors before they would look to raise rates. He also noted his view that near-term inflation is temporary given the recovery.

3. Covid cases and vaccinations rise

Since vaccination efforts began in the US on December 14th, more than 198.3 million doses have been administered and more than 78.5 million people were fully vaccinated per the CDC. The US is currently administering around 3 million shots a day, up from 1 million at the beginning of January. Daily new coronavirus cases in the US are now averaging around 70,000 per day, up from recent lows.

Source: https://covid.cdc.gov/covid-data-tracker/#vaccinations

4. Regulators calling for a pause in johnson & johnson vaccinations

due to blood-clot concerns Per Factset, the CDC and FDA jointly called for an immediate pause in the use of the JNJ COVID-19 vaccine after six recipients developed a rare disorder involving blood clots within two weeks of administration, resulting in one death and one hospitalization. The pause may last a few days to a few weeks. CDC data show that around 7 million Americans have received the JNJ vaccine, with more than 16 million doses delivered to providers. Concerns mirror those in the EU regarding AstraZeneca’s vaccine, which has been linked to 222 cases of blood clots out of 34 million recipients. Concerns the JNJ pause could substantially complicate US vaccination efforts at a time when some states are seeing surges and vaccine hesitancy remains a hurdle. However, the White House stated that the development will not have a significant impact since the JNJ vaccine makes up less than 5% of US doses to date.

Thinking Ahead

The US economic recovery is accelerating as retail sales and unemployment improve better than consensus expectations. Producer prices are increasing at the fastest pace in a decade, sparking inflation concerns. The Federal Reserve struck a dovish tone until unemployment improves and inflation is sustained. US vaccinations steadily climb despite Johnson & Johnson concerns. Earnings season kicks off this week in the US revealing further information about the recovery. Pallas Capital Advisors will continue to monitor economic, political, and corporate data for implications to markets.

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