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Markets Await February Jobs Report This Week: Market Commentary from Cabana’s CEO – March 3, 2021

4 years ago

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Interest rates remain the primary focus of investors. The rapid increase in rates over the past six months reached a crescendo last week with the 10-Year Treasury yield breaching 1.6%. To put this in perspective, that benchmark rate has risen nearly 200% since August 2020. Most of the jump has occurred since the beginning of the 2021. Bonds and other fixed income (“conservative”) assets are sensitive to rising rates, especially rapidly rising rates, and their prices have been under unrelenting pressure for months now. The impacts of this have begun to spill over into stocks, causing volatility as investors seek to re-price assets. We have seen the major equity indices swing 2% or more in three of the last four trading days.

Interest rates have essentially snapped back to the exact levels seen when Covid began one year ago. This is consistent with what appears to be a return to normalcy in the near future. I would expect that rates are due for a pause at this point while we wait for more data to come in. This may give a much-needed boost to the beaten down fixed income sector. The next big event on the horizon is the February jobs report on Friday. A big drop in unemployment would strengthen the case that we really are out of the woods. This could cause interest rates to take another leg up and increase money rotation out of technology and into cyclicals sectors. We have been watching this play out for a while now and the trend continues. 

We are at the tail end of earnings season and have seen almost 80% of companies beat estimates. Future earnings growth is now forecast to be 4% year-over-year. This is certainly not earth shattering, but it is positive, nonetheless.

    

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January 17, 2024

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