More Q’s than A’s…Perhaps a bit of window dressing going on in Europe before tomorrow’s quarter coming to an end, but the same can’t currently be said for the US. Although US indices are attempting a reversal out of red as I type, volumes are meagre and things still feel unsettled from the Archegos fallout that has yet to be completely quantified ($10bn hit to banks speculated). Either way, the very banks who were burdened yesterday, are benefitting today (WFC +2%, GS +1.6%, MS +1.5%) as each one raises their hands to say “not it.” At the same time, March consumer confidence exploded from 90.4 (revised lower) in Feb to 109.7 in March - the highest since March 2020, helping classic reopening plays benefit (American Airlines (+2.1%), United Airlines (UAL +3%) and Carnival (+3.3%) are all spiking). However, there has been no tapping of brakes on the reflation trade. Vaccine rollouts / infrastructure bills / inflation coming: none of these narratives are new, but their pull is simply too strong for yields to sit still for long. The 10-yr is still below the 2% level at 1.721, but that feels like a magnet at this point. It’s a tale of two stories for yields – fear of inflation vs. optimism about the economy, and it seems the latter is winning as investors see rising earnings growth expectations, historically low corporate borrowing costs and pent-up consumer demand. The spotlight is now leaning towards NFPs on Friday, but in the meantime we can expect some quarter-end rebal swings and an update from President Biden on his infrastructure plan. Still a lot to digest before Peter Cottontail struts into town.
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