Written by Michael Forrester – Founder, President, and CIO of High Note Wealth
Fri-YAY, y’all! Spring has sprung. Or maybe that’s premature thinking, but we’ll go with it. Things are relatively calm in the world of finance as the new round of stimulus gets absorbed and the final chapters of the virus get written. But “calm” doesn’t mean there isn’t plenty to review so let’s get to it…
At a high level, stocks are positive on the year just off the all-time highs achieved a couple weeks ago. Digging down a little, one could say the tech sector has been out of favor while things more attached to the economy re-opening have performed well. Given the incredible out performance of tech in the fall, a little balancing out is no surprise. Long-term, the market share gains that tech made during the pandemic could be more substantial than we even realize today. Time will tell.
As you know by now, there must always be a narrative around the market even if it’s completely made up. How else are you supposed to get clicks and sell ads? On that note, the prevailing storyline of March has been something along the lines of “oh my goodness interest rates are going up and therefore growth stocks are doomed, tech is a dumpster fire, and the only hope is undervalued companies that will bore us to sleep.” It’s a cute story, but rotation from one sector to another is not only natural, but an indication of health in a bull market. But that take doesn’t fire up the engagement rate like saying “tech is dead.” We have been using the temporary pause as a chance to add to quality names like Amazon, Google, Apple, etc.
As noted, interest rates are moving up, including mortgage rates, but let’s not get ahead of ourselves. The 10-year treasury note has now returned to the level it was before the pandemic which is still about half of what it was in 2019. And on an historical level, it’s still really low. It’s something that we are watching closely, but not something that warrants concern today.
That’s the assignment for the week. Now on to the extra credit…
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Whatever Floats Your Boat
Driving a ship that’s roughly the size of the Empire State Building probably isn’t easy. We get that. But getting it unstuck after you wedge it in the Suez Canal is apparently even harder. What a mess.
A cargo ship in the Suez Canal hit the ditch on Tuesday and neatly wedged itself into one of the most important passageways in the world. Crews from around the world have been working to try to re-float the boat to no avail causing a traffic jam akin to Lake Minnetonka on the 4th of July.
What sounded like a couple of days’ fix has turned into something that could take weeks. And the burn rate? Estimates say that the blockage is costing the global economy $400M PER HOUR. Yikes. With the global supply chain already stretched thin due to the pandemic, this adds insult to injury and will have ramifications on all sorts of materials and goods (including vaccine production) around the world.
Spring Break, Club Vax
Minnesota joined the ranks of “vaccines for all” starting Tuesday becoming the 12th state in the Union to pull down the velvet ropes. New Mexico is currently the leader in the clubhouse with approximately 34% of their population receiving at least one round. Georgia is currently pulling up the rear at 20%, while Minnesota sits nicely in the middle at 28%.
Starting last week, we started to see the supply surge which has prompted the openings. As we know, the counterpart to supply is demand and that seems to be where there is trouble. Demand has been very strong across the country in the population over 60. But under? Not great. Or at least it appears that way as of now, but it could be that the messaging of availability hasn’t been good. The gigantic elephant in the room we are tiptoeing around is that if the cohort of Americans under 60 are slow to adopt, it delays herd immunity…which in turn allows the virus to continue to float around and mutate.
Unlike COVID cases, the data on vaccinations is pretty clean so the numbers will tell the story. This will be helpful in monitoring in the weeks to come.
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