An Economic Rebirth

The markets are closed today in observance of Easter. The large cap S&P 500 chopped around most of the week, before pushing higher yesterday to close up over 1.15% on the week. Additionally, the indices that had been recent laggards, the Russell 2000 and the Nasdaq 100, outperformed the broad-based index, finishing up 1.42% and 2.7% respectively. The gains of the small cap stocks and technology stocks have fueled much of the enthusiasm for stocks over the past year. In March, we saw these two indices underperform, which left the market in search of leadership.

While the market was closed today, the US Labor Department did release the monthly unemployment numbers for March. The US economy posted stronger than expected job creation for the month, with the economy adding 916,000 jobs. The unemployment level fell to 6%. This number represents a low for the pandemic period. However, non-farm payrolls still sit roughly 7.5% below pre-pandemic levels. Hiring gains were led by an impressive gain in hotel and restaurant employment, a sign that the economy is seeing an end to the year-plus long struggle to get out of this environment. Economists expect to see further job growth next month, with some expecting an additional 1 million jobs added.

With all of the stimulus packages received over the past year, many Americans have seen their savings rate increase. While some may have been holding on to the money for security, others quite frankly have been waiting to have something to spend it on. A shift in consumption habits should be expected over the next few months. This pending shift is perhaps what has pushed the stock market into a tug of war for leadership. As the summer and fall re-opening begins to take shape and form, we should expect the stock market to again sort out the winners from the losers, and what we may see is that last year’s big winners will be the next 9 month’s biggest losers. This would put names like Zoom, Roku, and online retailers squarely in the market’s crosshairs when it comes to potential future underperformers. Expect to see recent winners continue to assert leadership in the market. This would put names like Deere, Caterpillar, Exxon, and Chevron at the top of the if the stock market is going to continue to charge higher.

Thanks for reading and Happy Easter,

Zach and Dave

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