Rebound Rally - Holdun

Market Summary

Markets recovered well this week, shaking off last week’s short-term pullback of -3.5%.

The S&P 500 closed out the week up 4.7%, while the tech-heavy NASDAQ finished up 6%, both hitting new record highs in the process. Optimism around a massive fiscal relief package and progress in vaccination efforts resulted in positive market sentiment for the week as recent volatility subsided.

Fears of a short-term pullback in stocks due to heightened valuations and increasing coronavirus infections are still ever-present, but strong quarterly earnings have led to an improvement in investor confidence.

45% of S&P 500 companies have reported Q4 earnings thus far, and in aggregate, results have been strong. 81% of companies are beating bottom-line estimates by a 15.9% surprise. The strong Q4 results bode well for equities in 2021.

Equities

4.7%S&P 500

The small-cap run was extended with the Russell 2000 up 7.7% and now up nearly 50% since the start of Q4 2020. Across the large-cap universe, the dichotomy persists. Recent earnings reports show 55% of S&P 500 companies growing earnings by a median of 22% Year over year, while 45% are saw earnings contract by a median of -20%.

Currency

1.0%USD/EUR

Dollar outperformance was driven more by Euro weakness than perceived dollar strength. Investor morale in the eurozone fell in February as severe lockdown measures left their mark on the economy.

Bond Yields

1.17%US 10Y TREASURY YIELD

The 10-year U.S. Treasury continued its recent upward trajectory, currently sitting at 1.17%, the highest level in almost a year. Optimism surrounding potential stimulus approval has pushed longer terms yields higher in recent weeks. Newly issued treasuries as a result of the stimulus package are likely to dilute treasury demand and push prices lower, Pushing yields higher in the process.

Commodities

8.9%CRUDE OIL

Crude oil prices hit $60 for the first time in a year. The combination of supplier restrictions and a continued uptick in demand has given rise to the most recent oil market recovery. The improving fundamentals were further supported by President Biden’s tough stance on Iran, quelling fears of a quick ramp-up in Iranian oil exports.

best8.3%Energy

Worst0.5%Healthcare

Market Outlook

Recovery-oriented areas are still offering room for growth. As fundamentals recovery, oil prices are likely to continue their recent upward trend, offering some buying opportunities, while the pick-up in the yield curve bodes well for the financial sector as they increase their net interest margins.

Elsewhere, early morning announcements from Tesla has seen Bitcoin jump over 10% to new record highs in just a matter of hours. Tesla declared an investment of $1.5 Billion in the cryptocurrency. More importantly, they announced their plans to accept payment for its cars and other products with Bitcoin in the near future.

Musk’s history of notoriously over ambitious declarations means that this latest announcement must be approached with caution. Nonetheless, Tesla is currently the 5th most valuable U.S Company, so an announcement like this holds considerable weight. Tesla’s stance undoubtedly acts as another indication of bitcoins growing popularity within the institutional space and will likely send the Bitcoin bull case posse into a frenzy for much of the week.

HOLDUN