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Michelle Buxton on KPCW Mountain Money

Albion Senior Wealth Advisor Michelle Buxton was a guest on Park City’s NPR radio affiliate KPCW discussing the role of tax deferred accounts (IRAs, Roth IRAs, 401Ks, 403Bs, etc) yesterday. With the IRS pushing back the tax deadline this year, investors have more time to contribute to their IRAs. Michelle also reflects on some of the lessons learned from covid and the importance of having liquid assets (money at your local bank) to weather unexpected storms. Michelle’s interview segment begins at 44:00.

Click the link to listen:

https://www.kpcw.org/post/mountain-money-april-12-2021#stream/0

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Weekly Market Recap

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US large cap stocks were strong last week, with all sectors in the S&P 500
posting positive returns except for energy. The Dow (33,801) and S&P (4,129) both closed at record highs on Friday, while the Nasdaq remains slightly below its high from mid-February. Results were mixed in other segments of the market, with US midcaps higher, US small caps lower, international developed markets posting solid gains, and emerging markets off a touch.


Bond markets also rallied over the course of last week, despite PPI data that came in higher than expected. Benchmark 10-year US Treasury yields fell 6 basis points, while 2y yields were down 4bp and 30y yields down 3bp.
Investment grade credit spreads were steady, while high yield spreads rallied ~10 basis points, allowing riskier bonds to outperform.

Energy prices fell last week as investors weighed the impact of renewed
restrictions on mobility and economic activity in Europe. The broader
commodity complex was mostly stable, as it has been for the past month.
In economic news, US PPI inflation data came in much higher than expected.


Core PPI (ex food and energy) rose 0.7% sequentially and 3.1% y/y (a 10-year high). See the Chart of the Week for a time series. Meanwhile, the newly released FOMC Meeting Minutes showed that the Fed remains committed to continuing its asset purchases until substantial further progress has been made towards its 2% inflation target (PCE Deflator) and full employment.

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Weekly Market Recap

Weekly Market Recap 20210402Download

Equities posted solid returns last week, led by large cap technology stocks. The S&P 500 reached a new all-time high on Thursday, closing above 4,000 for the first time.

Rates were fairly subdued last week. The Treasury curve flattened modestly, pivoting around the 10-year point, with 2y yields higher by 5bp while 30y yields fell by 2bp. Credit spreads tightened in sympathy with the broader rally in risk assets, allowing corporate bonds to post solid gains.

Oil and the US dollar were both stronger on the week.

Incoming economic data was encouraging. The Conference Board’s Consumer Confidence Index rose sharply to 109.7, and the ISM Manufacturing Index surged to 64.7, both of which represent pandemic highs.

Friday’s monthly payroll report was also very strong:

* Nonfarm payrolls = +916k (largest monthly gain since August 2020)

* U-3 Unemployment = 6.0% (fell 0.2% sequentially)

* U-6 Underemployment = 10.7% (fell 0.4% sequentially)

* Labor Force Participation Rate = 61.5% (rose 0.1% sequentially)

* Average Weekly Hours Worked = 34.9 (rose 0.3 hrs sequentially)

Weekly Market Recap 20210402Download
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Weekly Market Recap

Equities were mixed last week as the world watched the Suez Canal drama unfolding. Most sectors generated positive returns allowing the S&P 500 and the Dow to finish the week higher, while price declines in some large-cap communications names pulled the Nasdaq lower. Small caps were also lower on the week, as were many international stocks.

Bond markets mostly rallied last week. Treasury yields were lower as the curve flattened modestly, while credit spreads were stable.

Oil prices gyrated day by day as investors grappled with the impact of the Suez blockage on short term global supply.

Economic news was mixed last week. On a positive note, jobless claims hit new pandemic lows, and the University of Michigan consumer sentiment index registered a large sequential index. At the same time, personal incomes & spending, capital goods orders, and home sales all fell.

Finally, in two days of testimony before the US Congress, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen both pledged to continue supporting the economic recovery and downplayed concerns about runaway inflation caused by excessive monetary and fiscal stimulus. As the Chart of the Week shows, the Core PCE Deflator (the Fed’s preferred inflation metric) remains below its 2% target.

Download the entire Weekly Market Recap PDF by clicking download below.

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Weekly Market Recap

Weekly Market Recap – 20210319Download

US equities were mostly lower last week. Among large caps, a few sectors managed to finish in positive territory, including traditional defensives like communications (+0.5%), healthcare (+0.4%), and consumer staples (+0.4%).

The worst performing sector by far was energy (-7.7%), driven by falling oil prices and flagging demand as much of Europe institutes new lockdown measures to combat rising covid-19 case counts. See the Chart of the Week for a time series of YTD returns for the energy sector vs. the S&P 500.

Rates markets also continue to be in focus. After briefly stabilizing somewhat during the prior week, US Treasury yields resumed their upward march last week, with benchmark 10y yields rising 10 basis points and the 2s10s curve reaching its steepest level (+157bp) in more than five years. Credit spreads compressed slightly, but not by enough to offset the rate move, driving small price declines in USD-denominated bond markets.

Economic data was mixed last week, with retail sales (-3.3% m/m ex autos & gas), industrial production (-2.2% m/m), and housing activity (-200k bldg. permits m/m) all coming in below expectations, while jobless claims were steady. On a more positive note, the Conference Boards Index of Leading Economic Indicators (LEI) improved sequentially for the 10th consecutive month. Most importantly, the Fed reiterated its commitment to keeping interest rates low and maintaining asset purchases until substantial further progress has been made towards full employment.

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How Albion Does ESG

Jason Ware presents an introduction to ESG investing. This presentation was originally delivered at a Women of Albion virtual event on February 25, 2021.

ESG stands for Environmental, Social & Governance. The idea is to invest in companies that believe in more than the bottom line. Companies can and should do more within a broader mandate taking into account all stakeholders, not just shareholders. At Albion, we have taken a unique approach using this philosophy in constructing our ESG portfolio. This is embodied in the following quote:

“Society is demanding that companies…serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.” ~Larry Fink, BlackRock CEO

This is an audio version of the same ESG presentation.
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Weekly Market Recap

Weekly Market Recap – 20210312Download

Equity markets rallied last week, particularly after Wednesday’s release of consumer price inflation (CPI) data that was slightly below consensus estimates. The S&P 500 and the Dow both finished the week at fresh all-time highs, while the Nasdaq remains ~5% below its mid-February record. Small and midcap stocks continued their run of dominant performance, extending their YTD lead over large caps. International indices also finished higher.

Rates drifted lower for much of the week before abruptly moving higher on Friday. In the end, 10-year yields rose 5bp on the week to 1.62%, the highest close since February 12, 2020. 30-year yields rose 8bp to 2.38%, the highest level since late 2019. Investment grade credits spreads where largely unchanged while high yield spreads tightened, resulting in moderate price declines for high quality corporates while riskier bonds were close to flat.

Oil prices fell early in the week and then rallied; the US dollar did the reverse.

In an encouraging sign for the labor market, weekly jobless claims (new and continuing) reached their lowest levels of the pandemic in data released on Thursday. See the Chart of the Week for a time series.

Finally, in a Thursday night address to the nation, President Joe Biden announced that he would direct all US states to make vaccines available to any adult that wants one by no later than May 1st.

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Weekly Market Recap

Weeky Market Recap (FINAL) – 20210305Download

Equity markets were mixed last week, with significant dispersion across sectors. Cyclicals performed well, including energy (+10.1%), financials (+4.4%), industrials (+3.1%), and basic materials (+2.5%). Conversely, large cap technology stocks continued to struggle as they have for much of 2021, pulling the Nasdaq into the red for the week. Meanwhile, midcap stocks were higher while small caps were lower, narrowing the 2021 performance gap between the two. International stocks were mixed as well.

The selloff in Treasuries continued unabated last week: 10y yields rose 17bp, while 30y yields were up 15bp. Credit spreads, which began 2021 already on the tight side of historical averages, have been unable to compress enough to offset the move in rates, leading to price declines in corporate bonds across the credit spectrum. The only part of the bond market that remains in positive YTD total return territory is high yield (aka, sub-investment grade), owing to its shorter duration and lower exposure to Treasury yields.

Oil lurched higher last week after OPEC+ surprised the market by extending output cuts into April. Meanwhile the US dollar surged to its highest level since late November, relative to a basket of international currencies.

Friday’s jobs report was encouraging, as nonfarm payrolls (+379k) increased sequentially for the second consecutive month after falling into negative territory in December. See the Chart of the Week for a time series.

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Weekly Market Recap

Weeky Market Recap 20210226Download

Last week’s market action was dominated by interest rates. Treasury yields rose throughout February, at an accelerating pace that peaked on Thursday as 10-year yields briefly exceeded 1.6% intraday. The trend finally broke on Friday, with 10-year yields pulling back to around 1.4%, but interest rate volatility remains high. The CBOE Interest Rate Volatility Index (which measures implied volatility on interest rate swaptions) closed the week just shy of 78, the highest level in the past 3+ years outside of a few days in March of 2020. See the Chart of the Week for details.

The high levels of interest rate volatility are being driven by inflation concerns and questions about the forward path of Fed policy. These concerns were a headwind for stocks last week, particularly longer duration equities like large cap tech and emerging markets. Nearly all sectors in the S&P 500 finished the week lower, the lone exception being energy stocks which continued to perform well thanks to rising oil prices.

Economic news last week was positive (perhaps too much so for rates markets). The Conference Board’s Leading Economic Index and its Consumer Confidence Index both registered sequential gains, while initial and continuing jobless claims both came in lower than expected. And there was more good news on the virus front, as the FDA issued an emergency use authorization for Johnson & Johnson’s single-shot vaccine.

Albion’s “Four Pillars”:

*Economy & Earnings – The New York Fed’s Weekly Economic Index estimates real-time GDP growth to be -3.3% y/y. Growth is expected to be modest early in 2021, and pick up in the second half of the year.

*Equity Valuation – at 22x forward earnings the S&P is certainly not cheap, and long-term valuation metrics like CAPE (cyclically adjusted P/E ratio) suggest that compound annual returns over the coming decade are likely to be in the single digits. That said, lower equity returns may be justified in the context of ultra-low yields on alternatives like bonds and cash.

*Interest Rates – Rates remain low by historical standards despite recent volatility, supporting equity valuations and lowering borrowing costs.

*Inflation – After staving off deflation early in the pandemic, the Fed has communicated tolerance for short periods of above-target inflation. A cyclical bump in inflation may occur in 2021 as pent-up demand is released, testing the Fed’s resolve, but we do not expect higher inflation to persist.

Weeky Market Recap 20210226Download
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Weekly Market Recap

Weeky-Market-Recap-FINAL-20210219Download

US equities were mixed last week. Large cap cyclicals rose, including energy, financials, materials, and industrials, pushing the Dow to a record high during Wednesday’s session. However, sectors like technology, communications, and healthcare finished lower, resulting in small losses for the S&P 500 and Nasdaq Composite. Small and midcap US stocks were also down slightly, while international stock indices managed to eke out small gains.

Last week’s most prominent market action was in rates, as Treasury yields moved higher on the back of PPI inflation and retail sales figures that blew past consensus estimates. The 10-year finished the week at 1.34% (+13bp w/w), while the 30-year closed at 2.13% (+12bp w/w). Credit spreads compressed slightly, particularly in high yield, but not enough to prevent price declines across most spread-oriented sectors of the bond market.

Oil finally took a pause, finishing slightly lower on Friday after trading above $60/barrel (WTI) for most of the week. Market participants are anticipating a rise in OPEC+ production, and a short-term drop in demand as refineries take time to recover from freezing weather across much of the southern US.

In other economic news, weekly jobless claims remained range-bound, while residential building permits rose to a fresh 15-year high of 1.88 million (SAAR), a positive sign for housing and the broader economy in 2021. See the Chart of the Week for a time series.

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