March 18 Weekly Market Update

The market began the week on a strong note with the Dow Jones Industrial Average reaching new highs on Monday. Stocks then grinded sideways as the markets digested some mixed economic data.

Most notably, February retail sales and new housing starts data were released this week, and both came in below expectations. Retail sales fell 3.0% compared with an expected drop of 0.5%, while housing starts fell to a seasonally adjusted rate of 1.42 million, short of the expected 1.56 million. While these numbers could be a sign that the economic recovery is more fragile than investors realized, these fall-offs have more to do with weather than consumer spending. Both retail sales and new housing starts were significantly hampered in February due to frigid temperatures and a series of snowstorms across the country. If nothing else, the decline in retail sales was simply a counter to the extremely strong stimulus- check-driven jump of 7.6% in January.

A global shortage of semiconductors, or computer chips, is also beginning to create some uncertainty. The pandemic led to a series of supply chain shortages across the global economy—including semiconductor supply. As the economy heals, demand for semiconductors is beginning to grow, and the shortage of chips is leading to some significant disruptions. These shortages have created production challenges for businesses ranging from auto manufacturers to smartphone producers. While some manufacturers are hoping to gain government support to ramp up chip capacity, it could take time to make this a reality.

Lastly, all eyes are on the Treasury market, with the yield on the 10-year Treasury Bond eclipsing 1.65% this week. Rates have continued to rise on expectations of strong economic growth in the near future. The rapid rate increase—rising more than 100 basis points, or one full percentage point, since last summer—has alarmed some. However, despite such a swift back-up, rates are just now back to where they were in early 2020. Back then, many investors were (ironically enough) concerned at how low rates were, given a dearth of yield for income-oriented investors. As such, it appears what is most likely occurring in the bond market is nothing more than normalization.

Stay safe and be well.

The Dow Jones Industrial Average is an unmanaged index that cannot be directly invested into. Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.

The information provided is for educational purposes only and is not a recommendation of any kind or investment advice. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed.