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Market Commentary for the week ending March 20th, 2021


  • The Federal Reserve reconfirmed plans to keep its easy-money policy but bond yields continue to rise.
  • Stocks were lower in the U.S. and marginally higher in markets around the world.
  • Retail sales plunge impacted by the surge in Covid cases earlier in the year and cold weather.


This Week’s Performance Highlights

Market Indexes week ending March 19, 2021

Source: www.YCharts.com

  • Following its two-day policy meeting, Federal Reserve Chairman Jerome Powell said the Fed will keep its easy-money policy until the U.S. economy further recovers. He went on to say the economy is far from its employment and inflation goals leading most people expecting current near zero interest rates to persist through 2023. All of this was initially positive for both stock and bond prices but later turned negative.
  • U.S. stocks were volatile and lower for the week with large U.S. stocks, as measured by the S&P 500, down -0.8% and the same for the NASDAQ while the Dow Industrials did slightly better off just -0.5%. Year-to-date all of the indexes remain in positive territory with the Dow Jones leading up +6.6%.
  • Small U.S. stocks suffered a relatively sharp decline off -2.9%. To put this in perspective though remember that last week these stocks surged a stunning +7.3%!
  • Nine of the 11 sectors were lower including a sharp drop in energy stocks of -7.5%. This is a reversal of their recent rally higher as they hold onto a stellar 2021 gain of +30.7%. Financial stocks also underperformed the market averages, a bit surprising given continued higher bond yields, off -1.6%.
  • International stocks were marginally higher with developed markets up an average of +0.2%. Performance was mixed though in various regions with the Eurozone in negative territory weighed down by stocks in France and the U.K. while Japanese stocks had a strong week gaining +2.5%.
  • Emerging markets were also higher by +0.2% helped by stronger gains in Turkey and Brazil.
  • Commodities suffered a sizeable loss for the week down -3.3% hurt by a $4.56 per barrel decline in the price of crude oil. The price drop was partially the result of a report by the International Energy Agency forecasting the demand for gasoline has peaked due to long-term trends such as electric cars.
  • As the accompany graph shows, since the October 2020 lows the price of oil has climbed nearly straight higher until this week’s reversal. In spite of this huge move though, prices are still well below levels in late 2018.

    Brent crude oil

    Source: www.YahooFinance.com (BZ=F)

  • Gold has struggled in 2021 off -8.5% year-to-date but did manage to gain +1.1% in the most recent week. Real estate stocks moved the opposite direction losing -1.7%.
  • Bond prices continued to fall off another -0.3% for the week and -4.0% year-to-date. At the close of the week the yield on the 10-Year U.S. Treasury was at 1.709% up from 1.629% the week before.

Interesting Numbers


Air traffic reached a one-day post-Covid record on Saturday with 1,468,516 travelers passing the TSA checkpoints. As you can see in the graph the trend is moving sharply higher after pausing late January following the wave of Covid cases after the holidays. This growing demand has been great for airline stocks with United (UAL) up +8.0% for the week followed by American (AAL) gaining +6.9%. Year-to-date these stocks have jumped +40.5% and +58.3% respectively.

TSA checkpoint count

Source: https://www.tsa.gov/coronavirus/passenger-throughput


The Organization of Economic Cooperation and Development (OECD), an economic organization with 37 member countries, said it now expects the U.S. economy to grow in 2021 by its fastest rate since 1984 at +6.5%. The Federal Reserve said this week that it generally agrees with this estimate up from its December forecast of just +4.2%. Global output, according the OECD, will increase +5.6% after being off -3.4% in 2020.

Economic Indicators

Retails sales took an unexpected sharp turn lower in February falling -3.0%. This compares to economists’ estimate of only a -0.4% decline and follows January’s very strong +7.6%. The month’s decline was widespread with every category lower except groceries and gasoline. One of the biggest declines was in auto sales off -4.2% due to severe cold weather in parts of the South and Midwest. It is widely expected that sales will resume growth given the reopening of the economy and fresh new stimulus money in the hands of many consumers.

Industrial production, a measure of manufacturing, mining, and utilities, also disappointed off -2.2% for the month after having been higher for 4 consecutive months. Economists predicted a gain of +0.5%. Mining activity was off the most at -5.4%, manufacturing fell -3.1% hurt by a -8.3% slump in motor vehicles and parts, while utilities gained +7.4%. Severe weather is widely being used to explain all of this with the expectations generally that growth will resume.

Housing starts came in at a lower than expected 1.42 million and down -10.3% from the prior month, again, due to bad weather. Among the 4 regions of the country, the Northeast suffered the most off -40% while the West continued to see improvements with starts up +17.6% for the month. Long-term economists continue to expect the housing market to be strong.

Upcoming Economic Reports

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