Weekly Market Recap

Equity markets around the world rallied once again last week, driven by continued strength in earnings, notable progress on vaccine distribution, dovish commentary by Fed Chairman Jerome Powell, and some progress towards another round of economic stimulus in the US.

On the vaccine front, Sinovac Biotech announced that its vaccine was approved for use in China, Pfizer’s vaccine was approved for use in Japan, and the Biden administration announced that the US had reached deals with both Pfizer and Moderna for another 100 million vaccine doses from each company. Dr. Anthony Fauci now expects that any American who wants a vaccine will be able to get one in the spring (possibly as early as April).

Treasury markets responded to all of this good news by sending yields higher, with the 30-year breaching 2% for the first time since Feb 19th of last year (the same day equity markets reached their pre-pandemic peak). Meanwhile the 2s10s curve reached 110 basis points, the highest level since the pandemic began. Investment grade corporate credit spreads tightened by 2bp, not enough to offset the move in rates. Muni and high yield bond spreads tightened more vigorously, pushing prices higher in those markets.

Oil extended its 2021 rally, with WTI finishing the week up another 4.6%. As a result, the energy sector extended its lead as the best-performing sector so far in 2021, while utilities were the worst performer last week.