Not a bad week across the board with both equities and bonds gaining some ground. Under the surface there were pockets of weakness, though. Small-caps were down fractionally and some of the highflying growth/work from home plays were hit hard. The main economic news of the week was related to jobs.
Weekly Jobless Claims
First the good news. Weekly jobless claims pushed to a new low for the week ending May 1. The headline number came in at 498,000, a decrease of 92,000 from the previous week. The 4-week moving average was 560,000, a decrease of 61,000 from the previous week (chart below). Both numbers are at the lowest level since mid-March last year.
This wasn’t so good, at least relative to expectations. Nonfarm employment increased by 266,000 in April. A survey of 77 economists thought we’d see about a million new jobs (the range of estimates was 700,000 to 2.1 million). This is the biggest miss since at least 1998 – that’s as far back as I can find data.
Job growth was confined to leisure and hospitality, which added 331,000 positions. Of that total, more than half of the additions were in food services and bars (+187,000). The unemployment rate also disappointed, ticking up to 6.1%—the first increase since last April (chart below).
So, was this a bad report or were expectations simply out to lunch? Probably a bit of both. The payrolls report is notoriously tough to estimate and the data is exceptionally volatile. And some think the numbers are being held down by the expanded unemployment benefits that were passed a few weeks ago. Maybe there is something to it, but it is impossible to quantify.
We’d chalk this report up as an aberration. Certainly, the market reaction didn’t indicate a softening labor market. Bond yields initially fell, but reversed higher as the day went on. Commodities such and oil and copper were also up on the day. The real take-away is probably that the Fed isn’t going to be talking about tapering their asset purchases until at least the third quarter of this year, if not later.
Charts We Found Interesting
1. New covid-19 cases in the US are now down 82% from their peak in January, lowest levels in 7 months.
2. Hospitalization rates are also resuming their fall.
3. We are getting to the point that there’s now more vaccine available in the U.S. than people wanting to take it..
4. Conversely, the data in India is terrible.
5. Back to the payrolls report. While the recovery is rolling on, we are basically back to where we were during the depths of the financial crisis, at least as it relates to the jobs recovery.
6. The second quarter is shaping up to be a scorcher – estimates for GDP range from +9% to +11%.
7. So far the Coinbase listing has been a disappointment. It opened trading at $381 on April 14th and hit a high of $430 that day. Ever since then it has bled lower.
8. Coinbase is indicative of the pain in some of the frothy sectors of the market. Cloud computing, solar, weed companies have all been under serious pressure the last few days (they did bounce Friday). The poster child for this is Cathie Wood at Ark. Her flagship fund is seeing assets rush out the door.
9. If you think housing is nuts here, look north of the boarder.
10. Lumber is acting like a crypto currency. ‘Soaring lumber prices that have tripled over the past 12 months has caused the price of an average new single-family home to increase by $35,872, according to new analysis by the NAHB Economics team. This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment.’
11. Drug smugglers are nothing if not adaptable.
Have a good weekend.
Published by Gemmer Asset Management LLC The material presented (including all charts, graphs and statistics) is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The material is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objective, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this material is suitable for their particular circumstances and, if appropriate, see professional advice, including tax advice. The price and value of investments referred to in this material and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or prices of, or income derive from, certain investments. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Gemmer Asset Management LLC (GAM). Any mutual fund performance presented in this material are used to illustrate opportunities within a diversified portfolio and do not represent the only mutual funds used in actual client portfolios. Any allocation models or statistics in this material are subject to change. GAM may change the funds utilized and/or the percentage weightings due to various circumstances. Please contact GAM, your advisor or financial representative for current inflation on allocation, account minimums and fees. Any major market indexes that are presented are unmanaged indexes or index-based mutual funds commonly used to measure the performance of the US and global stock/bond markets. These indexes have not necessarily been selected to represent an appropriate benchmark for the investment or model portfolio performance, but rather is disclosed to allow for comparison to that of well known, widely recognized indexes. The volatility of all indexes may be materially different from that of client portfolios. This material is presented for informational purposes. We maintain a list of all recommendations made in our allocation models for at least the previous 12 months. If you would like a complete listing of previous and current recommendations, please contact our office.