April 12, 2021 •OneAscent
The unique nature of this most recent recession, marked by a very sharp contraction in economic activity due to government mandated limits on activity followed by unprecedented fiscal and monetary stimulus as well as a quick economic reopening, may have potentially created some logistical challenges. In other words, factories and other key elements of the global supply chain may have shut down for economic or health-related reasons, and now must get back online quickly to support significant demand stemming from cash rich households and businesses. These significant gaps in supply juxtaposed against above-average demand have the potential to create inflationary pressures.
The difference between the yield for Treasury Inflation Protected Securities (TIPS) and traditional (“nominal”) Treasuries is called the breakeven inflation rate. This difference can be thought of as a market-based expectation of future inflation. If future inflation is higher than the breakeven rate, TIPS are expected to outperform nominal Treasury securities. The chart below highlights the historical breakeven rate between 5-year nominal Treasuries and 5-year TIPS, which current stands at 2.6%.US Treasury Breakeven Inflation Rate (5 Year)
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Source: Bloomberg
Key Economic Releases This Week
| Day | Report | Period | Consensus Est. | Previous |
|---|---|---|---|---|
| Tuesday, April 13 | Consumer Price Index (month-over-month) | March | 0.5% | 0.4% |
| Wed., April 14 | Import Price Index (month-over-month) | March | 0.8% | 1.3% |
| Friday, April 16 | Building Permits (annual rate) | March | 1.74 million | 1.72 million |
| Friday, April 16 | Housing Starts (annual rate) | March | 1.61 million | 1.42 million |
| Friday, April 16 | U of Michigan Consumer Sentiment (prelim) | April | 88.1 | 84.9 |
| Source: Bloomberg |
Asset Class Returns
| Category | Representative Index | YTD 2021 | Full Year 2020 |
|---|---|---|---|
| Global Equity | MSCI All-Country World | 7.9% | 16.3% |
| US Large Cap Equity | S&P 500 | 10.4% | 18.4% |
| US Small Cap Equity | Russell 2000 | 13.9% | 20.0% |
| Foreign Developed Equity | MSCI EAFE | 6.1% | 7.8% |
| Emerging Market Equity | MSCI Emerging Markets | 3.4% | 18.3% |
| US High Yield Fixed Income | ICE BofAML High Yield Bond | 1.6% | 6.2% |
| US Fixed Income | Bloomberg Barclays US Aggregate Bond | -2.9% | 7.5% |
| Cash Equivalents | ICE BofAML 0-3 Mo Deposit | 0.0% | 0.5% |
| Source: Morningstar as of April 9, 2021 |
Prices & Interest Rates
| Representative Index | Current | Year-End 2020 |
|---|---|---|
| S&P 500 | 4,129 | 3,749 |
| Dow Jones Industrial Avg. | 33,801 | 30,497 |
| NASDAQ | 13,900 | 12,886 |
| Crude Oil (US WTI) | $59.32 | $48.52 |
| Gold | $1,743 | $1,893 |
| US Dollar | 92.16 | 89.94 |
| 2 Year Treasury | 0.16% | 0.13% |
| 10 Year Treasury | 1.67% | 0.93% |
| 30 Year Treasury | 2.34% | 1.65% |
| Source: Bloomberg, US Treasury as of April 9, 2021 |
Past performance may not be representative of future results. All investments are subject to loss. Forecasts regarding the market or economy are subject to a wide range of possible outcomes. The views presented in this market update may prove to be inaccurate for a variety of factors. These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.