An Uncommon Set-Up Signals Caution

shallow focus photograph of black and gray compass

February’s strong jobs gain was the latest in a slew of solid economic reports suggesting the US economy continues to recover from the 2020 recession, according to a note from Stifel on Monday.

"While no one data point can signal the US economy is out of the woods, coupled with recent gains in auto and retail spending and manufacturing as well as robust housing market activity, ongoing positive monthly job creation will work to boost confidence and drive higher expectations for more solid growth in the coming months and quarters," the report said.

Good point but remember that government bonds prefer misery because it keeps a cap on their mortal enemy, inflation. So the better the news for the economy, the worse for bonds and tech.

The bright side: Accelerating US economic growth has been the most significant driver of equity purchases by households during the past 30 years, according to Goldman Sachs. Net equity buying by households outpaced inflows from other sources when real yields and breakeven inflation were rising during that period, according to the brokerage.

Goldman lifted its household net equity demand outlook for 2021 to $350 billion from $100 billion and projects a doubling of corporate equity demand from the prior year to $300 billion.

Inflows into equity mutual funds and exchange-traded funds totaled $163 billion since the start of February, the largest five-week inflow on record in absolute dollar terms, according to Goldman analysts.

Now I’ve got some bad news — sorta, kinda, ish. Depends on how you feel about historical statistical analysis.

It’s not everyone’s cup of tea but I like it because I believe that investors tend to do the same things over and over again given similar emotional stimuli.

With that said, I have a friend who has been a pioneering, world-class statistical analyst for more than four decades – and is a top outside advisor to well known hedge fund managers. Can’t name either but trust me on this one.

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