MARKETS:
Written By: Sarah Lee, Vice President of Investments
Economic Risks
Investors’ Concerns Are No Longer COVID-19 Related
In an improving and recovering economy, professional investors new number 1 fear is inflation. Based off a survey through BofA Securities, fund managers now say that inflation topples COVID-19 as the biggest threat to the bull market. From the survey, 91% see the economy improving and 48% said we’re in a “V-shaped recovery.” However, higher bond yields that signal economic growth also means a higher borrowing cost, which could reverse the recovery. Additionally, a higher discount rate means lower valuation for assets like stocks.
The White House has discussed a tax on high income individuals or corporations to help with Covid-19 relief. Treasury Secretary Janet Yellen, is using the Organization for Economic Cooperation and Development to press for a global minimum corporate tax that would end historical corporate tax-cutting competition.
U.S. Employment
Jobless Claims Reach Lowest Level of the Pandemic
Signaling a prosperous economy is low unemployment. Jobless claims fell to their lowest level last week since the start of the pandemic as hiring and consumer spending drive a U.S. economic revival. Unemployment filings have fell to 684,000 last week form 781,000 a week earlier. Although a decrease in unemployment filings are a go for the economy, the benefits of the recovery aren’t reaching everyone yet. Many Americans are suffering from spells of long-term unemployment. Americans are still ramping up spendings with stimulus checks out into their pockets and widespread vaccinations. In-person services are also seeing pre-pandemic levels such as salons, gyms, hotels, and restaurants.
Real Estate
Hot Housing Market with Overflow of Real-Estate Agents
Where there were 1.04 million homes for sale at the end of January (record low from 1982), the number of real-estate agents surge in comparison to homes for sale in the U.S. This phenomenon reflects both the extremely tight supply of homes on the market and how the uptick in prices are convincing thousands of Americans to sell their real estate. As the pandemic eliminated millions of jobs, many people sign up for the real-estate profession. The booming housing market suggests theres a lot of money to be made selling houses. Newer agents are struggling as home sellers generally favor agents with years of experience and a track record of selling homes. Consequently, most agents make little or even no money in the beginning since they typically rely on commissions. Realtors with two years of experience or less earned a median gross income of $8,900 from their real-estate work in 2019.
Financials
Big Banks Limiting Losses With Fast Sale of Archegos Assets
Goldman Sachs Group Inc. and Morgan Stanley were quick to move large blocks of assets before other large banks that traded with Archegos Capital Management, as the scale of hedge fund’s losses became apparent. Formerly ran by Tiger Asia Manager Bill Hwang, the losses at Archegos have triggered the liquidation in excess of $30 billion in value. Throughout Monday, blocks of stocks linked to Archegos continued to sell off. Archegos took concentrated positions in companies and help some positions in a miix of stock and swaps. Their losses threatened to spill over into the prime brokerage businesses. Morgan Stanley sold 45 million shares of ViacomCBS Inc. Sunday night, and other banks continued to sell blocks of companies such as Discovery Inc., GSX Techedu Inc., and Vipshop Holdnigs Ltd.
Archegos losses comes as a council of top U.S. regulators known as the Financial Stability Oversight Council and is already scheduled to meet on Wednesday to discuss hedge-fund activity during the pandemic-triggered crisis. Many are pointing to cases that may effect many on Wall Street in the coming week.
Works Cited
Cambon, Sarah. U.S. Jobless Claims Reach Lowest Level of the Pandemic - WSJ. https://www.wsj.com/articles/weekly-jobless-claims-coronavirus-03-25-2021-11616627094?mod=itp_wsj&ru=yahoo. Accessed 29 Mar. 2021.
Chung, Maureen Farrell, Margot Patrick and Juliet. “Goldman, Morgan Stanley Limit Losses With Fast Sale of Archegos Assets.” Wall Street Journal, 30 Mar. 2021. www.wsj.com, https://www.wsj.com/articles/goldman-morgan-limit-losses-with-fast-sale-of-archegos-assets-11617062028.
Friedman, Nicole. “New Realtors Pile Into Hot Housing Market. Most Find It Tough Going.” Wall Street Journal, 21 Mar. 2021. www.wsj.com, https://www.wsj.com/articles/new-realtors-pile-into-hot-housing-market-most-find-it-tough-going-11616328002.
Jasinski, Nicholas. This Is Investors’ Biggest Concern Right Now. (Hint: It’s Not Covid.). https://www.barrons.com/articles/investors-are-wary-of-covid-but-their-new-top-risk-is-inflation-51616197535. Accessed 29 Mar. 2021.