Weekly Snack with Dave
DATA DISAPPOINTMENT
It looks like the consumer sector spent what it wanted to out of the stimulus checks in one month — March. Because there is no mistaking the pullback in spending in April. Retail sales were flat versus the consensus estimate of +1.0% (though the prior month was revised up to 10.7% from 9.8%).
PRODUCTION POP — BUT NOT BROAD BASED
Industrial production rose 0.7% in April, following on the heels of the retail sales dud. March was revised up to +2.4% from +1.4% but that made the slowdown more intense. The supply side continues to lag behind the demand side, and this is the “inflation pressure” story for the most part.
PEAK HOUSING
Starts plunged 9.5% to 1.569 million units (annualized) versus expectations of a 2.0% giveback (to 1.704 million). Everyone blames “supply shortages” — but then why wasn’t this already factored into the consensus forecast if it was so obvious?
WHERE WILL THE FUTURE GROWTH IN ESG BE?
For investors looking to gain exposure to ESG strategies, there is no shortage of options. Our analysis suggests an emphasis on ESG does not generate positive alpha, but also doesn’t detract from performance — though there is pretty clearly greater concentration risk with ESG indices.
FOREWARNED IS FOREARMED
In our view, even if things have begun to calm down since the first quarter, a significant cooling in the third quarter is not yet priced-in. For now, markets appear focused on the vaccination progress, re-opening and “pent-up” consumer demand, but the realization that these stimulative elements are behind us could be a major catalyst for risk appetites to fall.
INVESTORS INCREASINGLY BETTING ON GROWTH AND INFLATION
The message from the equity market has been very clear of late — investors are betting on sectors/industries that are tied to faster growth and inflation and shunning areas of the market that are more defensive in nature.
A CASE OF BEING CAREFUL WHAT YOU WISH FOR
While there are some parts of the stock market that can weather the storm better than others in this kind of environment, the reality is that anyone who is bullish on stocks overall because of an inflationary environment better be careful what they wish for. If you do believe in the inflation story, better to go into real assets as opposed to equities.
These snippets are from Weekly Buffet with Dave, a Rosenberg Research publication that compiles the best articles of the week from Dave’s daily report, Breakfast with Dave. To access the full report, click here to sign up for a free trial.