The market has been behaving just about right in line with our expectations. Value and high-dividend equities have led the way for the first quarter of 2021, with tech and growth stocks taking a breather. Like I stated a couple of weeks back, we feel that tech probably set a low for the year in the sell-off on March 5th or thereabouts. Tech has had a big week, rallying back up near its high. This was not unexpected; it would be almost impossible for the market to move higher without bringing tech along with it.
Microsoft hit a new high, and software stocks are helping lead the technology sector higher today. The chart above shows Microsoft (MSFT) breaking through its February high to achieve a new record. Stronger semiconductor stocks are also boosting the tech sector.
Cash build-up has, and is taking place, with institutional investors cash balances up 9%, +$241 billion, since the start of the year. Institutional investors have put a lot of cash on the sidelines since the start of the year, and much of this was raised in the past two weeks. Look for them to redeploy and push the market higher in the near term.
Vaccination Frontier Update: 45 states are now near or above 60% combined penetration (vaccines + infections). As we commented in the past, the key figure is the combined value >60%, which is presumably near herd immunity. That is, the combined value of infections + vaccinations as % population > 60%.
– Currently, 45 states are basically all at this level
– SD, ND and RI are now above or near 90% combined penetration (vaccines + infections)
– So slowly, the US is getting to that threshold of presumable herd immunity.
In another positive labor market report, job openings increased 3.8% in February to 7.367 million, up in four of the past six months, and to the highest level since January 2019. The improvement was led by more job openings in some of the industries that were hit the hardest by the pandemic, such as health care and social assistance, accommodation and food services, and arts, entertainment, and recreation. Hires also increased, up 5.0% to 5.738 million, led by food and accommodation services. The industry leadership in job openings and hires reflects the accelerating vaccination rate and more business reopenings.
Layoffs and discharges ticked up marginally, but so did voluntary quits, indicating some improvement in worker confidence about the ease of finding a job. The number of unemployed per job opening fell to 1.35 from 1.43 in the previous month, its lowest level in nearly a year, and down from a peak of 4.99 during the lockdown last spring. Similarly, the pool of available labor per job opening fell to 2.30, also its lowest level in close to a year. The declines were partly driven by workers leaving the labor force during the pandemic, which means that there is more labor market slack than these ratios suggest. Nevertheless, they show that conditions are gradually improving.