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5 charts from the past week that tell an interesting story in markets and investing…
1) Planes, Trains, and Automobiles
As we approach herd immunity and the end of covid-19, investors are looking ahead to the reopening of America and with it increasing demand for Planes, Trains, and Automobiles.
The top performing S&P 500 airline stocks this year: American ($AAL), Alaska Air ($ALK), and United ($UAL)…
The top performing S&P 500 railroad stocks this year: Kansas City Southern ($KSU) and Norfolk Southern ($NSC).
The top performing S&P 500 auto stocks this year: Ford ($F) and General Motors ($GM).
2) Rising Yield Curve, Rising Banks
The US Yield Curve (spread between 10-year and 2-year yields) has been increasing, at its steepest levels since 2015.
This trend has greatly benefitted bank stocks (on the expectation of increasing profits from borrowing money at low rates and lending money at higher rates), which have been outperforming the market by a wide margin this year.
The top-performing bank stocks in the S&P 500 this year?
People’s United ($PBCT), Firth Third ($FITB), and Wells Fargo ($WFC).
3) From Global Contraction (2020) to Global Expansion (2021)
2020 was the worst year for global economic growth since the Great Depression, but most economists had actually forecasted the declines to be much worse. The expectations for 2021? A v-shaped recovery, with US Real GDP expected to post its highest growth rate (>6%) since the early 1980s.
4) The Great Revaluation?
In 2020, Snowflake (cloud data storage company) was emblematic of the idea that the price you paid for a high growth company no longer mattered. As I wrote back in December, it was trading at over 245x sales, the most highly valued large cap company in history.
While its stellar growth has continued, it has since declined 52%, and investors are now paying only 98x sales.
5) Stimulus Boom, Housing (Building/Renovating/Furnishing) Boom
No area of the economy has benefitted more from the stimulus money, record incomes, and ultra-low mortgage rates than the housing sector.
A leader in home furnishings, Restoration Hardware ($RH), is up 5x in the past year while homebuilding ($XHB) and home construction ($ITB) stocks have more than doubled.
Demand all things related to housing remains very strong, but something to watch will be mortgage rates, which (after hitting an all-time low of 2.65% in January) have started to move higher…
And that’s it for this week. Thanks for reading.
Have a great weekend everyone!
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