• Shopping Woes: Walmart is now the second larges online retailer. Not surprisingly though, their earning margins (in spite of explosive e-commerce growth) have shrunk in stark contrast to Amazon’s margin of earnings, which has risen sharply. It seems that the brick and mortar cost structure of many traditional retailers is impacting their bottom line. Similar discrepancies can be found when comparing legacy retail players like Target and Macys compared to online retailers like Etsy and Wayfair.
• Times they are a-Changing: Over the past 10 years momentum stocks have far outperformed the S&P500 by over 100%. Yet, in 2021 this trend has reversed as momentum stocks have returned less than the overall market. With the rebalance that occurred in the momentum index last month that underperformance may change. Financials increased their exposure to about 32.5% and Tech dropped from 41% to about 18% exposure. Momentum stocks are looking more attractive for the first time since 2017.
• It costs how much? This past week data showed that the US household net worth rose by $25.6 trillion over the past year. For context, the average annual increase in household net worth over the past decade through 2019 was just $5.35 trillion. This impacts Bloomberg’s monthly survey of economists, which shows that the expected chance of recession in the next 12 months is at its lowest level since 2008. But....some worry that this extra cash may also lead to more inflation with consumers willing to accept higher prices.
• Love those Treasuries:Most investors have been expecting less demand for the US treasuries, which are typically seen as a bastion of safety, as the economy recovers from the pandemic. But demand at treasury auctions has increased as foreign buyers are snapping up inventory. It is less cost to foreign investors to hedge the US dollar using treasuries as the dollar index is down 2.4% this quarter. Recent Treasury Auctions have seen the majority of bids (60%) coming from overseas investors.