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SWS WEEKLY SUMMARY - March 12, 2021


Markets

The markets bounced back this week with SP500 closing at 3943, up 2.6%, Dow up 4.1% to 32779 and NASDAQ up 3.1 to 13320.

The smaller companies were similar to large caps with mid cap SP400 up 5.3% and small cap SP600 up 7.4%.

For the past 3 months, SP500 is up 8.1%, Dow up 9.8%, NASDAQ up 7.1%, SP400 up 18.4% and SP600 up 29.1%

Over the last 6 months, SP500 up 15.9%, Dow up 17.1%, NASDAQ up 20.5%, SP400 up 39.9% and SP600 up 59.4%

In past year SP500 is up 45.4%, Dow up 41.4%, NASDAQ up 69.1%, SP400 up 71.0% and SP600 up 92.6%

For the broad market indices, DOW has been best over the past 3 months and NASDAQ over the past 6 and 12 months. Based on market cap, the small cap SP600 did best over the past 3, 6 and 12 months.

Sectors

For the SP sectors, the past week saw XLB (materials) up 4.5%, XLC (communications) up 1.8%, XLE (energy) up 1.1%, XLF (finance) up 3.3%, XLI (industrial) up 3.6%, XLK (technology) up 1.9%, XLP (staples) up 2.3%, XLRE (real estate) up 6.0%, XLU (utilities) up 4.5%, XLV (health) up 1.4% and XLY (discretionary) up 6.4%

For 3 months XLB up 12.4%, XLC up 12.0%, XLE up 35.0%, XLF up 23.8%, XLI up 10.5%, XLK up 5.3%, XLP down – 1.3%, XLRE up 8.3%, XLU up 0.8%, XLV up 3.4% and XLY up 6.6%

Over 6 months XLB is up 19.2%, XLC up 24.5%, XLE up 62.9%, XLF up 38.7%, XLI up 23.0%, XLK up 14.0%, XLP up 1.7%, XLRE up 7.1%, XLU up 4.5%, XLV up 8.0% and XLY up 13.0%

In the past year XLB up 69.3%, XLC up 61.7%, XLE up 66.5%, XLF up 50.7%, XLI up 53.9%, XLK up 56.1%, XLP up 17.0%, XLRE up 10.5%, XLU 8.2%, XLV up 26.4% and XLY up 63.1%.

The relative performance of the sectors was 1 week XLY best and XLE worst, 3 months XLE best and XLU worst, 6 months XLE best and XLP worst and 12 months XLB best and XLU worst.

Economy

This week was light for economic news but most reports were positive.

Wholesale inventories were up in January by 1.3% compared with a revised December of 0.6. Sales were up 4.9% from December and up 5.9% from January 2020.

There was also good news on inflation. The Consumer Price Index rose only 0.4% in February and 1.7% for the year. This was the lowest yearly rise since 2015. The Producer Price Index was up 0.5% for February with January 1.3% and December 0.3%. The rise over 12 months was only 2.8%.

Initial unemployment claims, a proxy measure of layoffs, were down by 42,000 this week to 712,000. This is down by 200,000 from January and one of the lowest numbers for the past year. However, the high for the Great Recession in March 2009 was 665,000. Continuing claims were also down from 4.34 to 4.14 million. There were 6.9 million unfilled jobs in January, still 2.5 million fewer positions than before March 2020.

Consumers reacted positively to the economic news as well as promises for more vaccines. The preliminary Consumer Sentiment Index from the University of Michigan was the strongest in a year, up to 83 from 76.8 in February. Current economic conditions went form 86.2 to 91.5 and expectations form 70.7 to 77.5

Other Factors

The markets started the week buying on the dip which saw NASDAQ drop into correction territory with a drop of more than 10%. The momentum continued with the release of the mild increase in CPI which calmed inflation fears and led to a drop in bond yields. Finally, the passage of the 1.9 trillion COVID relief package had the week ending in a broad rally for all stocks.

There seems to be a general belief that the good economic news and earnings reports, combined with the relief package and rapid vaccine rollout will result in strong economic growth going forward. This will be balanced with inflation fears which push up bond yields. The yields this week dropped to 1.51 after rising last week above 1.60%. For comparison, one year ago the yield was 0.4%. Yields become attractive for fixed income investors, and therefore provide competition for stocks, when they approach the 2% yield that is generally expected for stock dividends.

Stock Wealth Safely this week

There were three Stock Wealth Safely winners this week. LEN reached its 5% target in 3 weeks with SPX rising 0.5% during that time, CAG also in 3 weeks (SPX up 1.6%) and CVS in 2 weeks (SPX up 1.1%).

New Stock Wealth Safely selections were WEN, COST and CHKP.

The Stock Wealth Safely approach results in consistent stock market returns. ​

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