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Week of March 29, 2021 Thumbnail

Week of March 29, 2021

Greetings,

We hope this week's update finds you and your family well.  Our weekly market update is linked and here are a few key takeaways:

  • News Flow:  Economic data for February was largely negative, but much of it has to do with extreme weather conditions.
  • Interesting Numbers:  First time homebuyers declined for the month of February.  Beyond some extreme weather in February, it is possible that the rise in interest rates is starting to bite into housing demand.  See the attached summary for some pretty interesting numbers on housing.
  • Tough Comps Coming For Some:   The markets were all over the place last week and are now looking to earnings season and more importantly to guidance from company management on just what we can expect in 2021 and 2022.  From a high level, analysts are expecting S&P 500 earnings growth in the second quarter of over 40% and six quarters of double digit earnings growth.  When we drill down to the industry and company level, it will be clear that many companies will face tough comparisons against last year--mainly the companies that benefited from the pandemic--technology and cloud, staples and retailers like Wal Mart and Target.  So comps will be tough and attention will shift to forward guidance for not only these companies but also those that will benefit more from the reopening of the economy-entertainment and travel, banking and real estate.  These companies will face easy comparisons against a cratering of earnigs in 2020 but again, the market will be more interested in forward guidance than from blowout numbers with easy comparisons.  
  • Today: Over the weekend Bill Hwang's New York based hedge fund got caught on the wrong end of leverage and derivatives positions.  His fund borrowed from big banks like Credit Suisse, JP Morgan, and Goldman Sachs, and on Friday the banks began to initiate margin calls and sell very big blocks of some of his positions to coverage the margin.  This created some volatility in the futures as you will see this morning.  Goldman is saying any impact will be immaterial to them, however Credit Suisse is down over 14% in pre-market trading.  Morgan Stanley was shopping a very large block of Viacom shares yesterday and Viacom is down pretty big since Friday close but shares are starting to bounce back.  It does not look like anything systemic here other than a fund getting greedy and overleveraging.

Our full recap is linked below for your review.  As always please do not hesitate to contact us on any questions you might have or to schedule an appointment either virtually via Webex or to schedule an in person meeting at our office in Harrisburg.  

John J KLobusicky, CFA, CAIA, Managing Partner

FMA Advisory Inc.

717-232-8850

jklobusicky@fma-advisory.com

 

 

 

Market Insights - March 26, 2021

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