– Risk assets shook off the Fed chatter from the prior week and recovered losses while Treasury yields climbed higher in one of their worst weeks of 2021.
– Everybody was a winner – all sectors and styles moved higher. The S&P 500 made a new all-time high.
– Emerging Asia countries were the only week spot among international equities.
– Bitcoin and Lumber both declined more than 10%. Lumber prices have fallen more than 55% in less than two months.
– This was the first week in 2021 where the market showed signs of losing some of its technical luster.
Note – we will be traveling next week and will only produce a Market Outlook should unusual market or model conditions warrant it.
– Learning that the Fed Funds rate might climb by 25bps within the next 15 months was enough to push risk assets down by 2-3%. Treasury prices moved higher.
– Value stocks were hit hard – down 4 to 5%. Large Cap Growth and Tech were safe-havens for the week.
– Peruvian stocks declined by double digits for the second week in a row. The country is the world’s worst performer, now down more than 20% ytd.
– Both the US dollar and long duration Treasuries rallied by more than 2%. Lumber fell another 15% and is down 47% from its all-time high in May.
– PPI inflation above 10% is associated with stock market returns of -8.9% annualized, explaining how the inflation basket has become such a big detractor in the Monetary composite in the face of a wall of liquidity and easy money.
– We’re comfortable holding some additional cash until we see a more substantial break in investor euphoria, inflation pressures, or both.
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Market Risk Index scales from 0 to 100%. Higher readings correspond with higher risk markets. Scores below 25% are bullish. Scores between 25-75% are neutral, and scores above 75% are markets vulnerable to major drawdowns.
Model Category Readings (Percentiles)
