Fresh Highs As US Economic Data Fuels The Fire

Market highlights 

  • US equities rose to fresh record highs following a better-than-expected payrolls print, before March services ISM added fuel to the fire
  • Markets saw one of the best quarters for stocks, relative to bonds, in the past 60 years
  • Oil prices contiued to slide on third and fourth wave virus outbreak concerns in Europe and parts of Asia
  • USD weaker through the global risk-on channel as FX traders sell, anticipating investors will put more money to work outside the USA
  • Gold has formed a short-term double bottom but needs to break before it can head higher


US equities rose to fresh record highs Monday, the S&P rising a further 1.4% after breaking through 4,000 on Friday following a better-than-expected payrolls print. Additional fuel came on Monday with a record high read on the US services ISM in March. US10Y yields were down 2bps to 1.70%, oil down 4.6% and energy stocks the only sector in the red as demand concerns still linger.

US stocks broke higher ground on Monday after a report showed that America's services sector accelerated last month at the fastest pace on record.

Suppose investors were looking for any confirmation that the US reflation trade is on full bore well. In that case, they might have just received that sweet tasting "poof is in the economic pudding" as US economic data is flying. The market just took another monumental stepping stone as both backwards-looking (payrolls) and forward-looking (ISM) is confirming what investors have been pricing in all along up until now: a post-COVID return to economic glory.

Both historical and forward-looking strategies have their place, but when both confirm a huge economic rebound, there’s only one place for stocks to go: higher. Provided the data continues to be supportive, equities and risk-on can remain at elevated levels for some time – or at least until the next unexpected downside shocker hits.

With month-end rebalancing and the Easter Holiday (Good Friday) out of the way, while taking cast back to last Friday's US payroll, investors wasted little time to make up for the lost time. And with the Vix shifting under 18, a more systematic type flow is back to the market. Indeed, this was among the best quarters for stocks relative to bonds in the past 60 years.

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