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US equities and bonds rose this week and left Wall Street’s top equity barometer at a record high as the country’s latest signs of economic recovery brought about a shift towards US assets. .
Economic reports pointing to an acceleration improvement of the labor market and a stimulus-fueled shake-up in consumer spending reinforced domestic and foreign investors ’appetite for U.S. securities.
The rise in stocks and tandem bonds contrasts with typical market dynamics, but a confluence of factors provided a boost to the two markets this week, analysts said. The S&P 500 stock index gained 1.4% during the period, leaving it up more than 5% from the end of March, in what would be its third consecutive monthly advance.
Economically and sensitive sectors of the S&P 500, such as energy, finance and industry, have led the way since the end of January, with about a fifth each.
“As the economic reopening accelerates in the coming months, we believe the bullish market will remain solid,” said Mark Haefele, investment director at UBS Wealth Management. “We maintain a cyclical bias and prefer the discretionary, energy, financial and industrial consumer of the US.”
The group, which manages the money of wealthy individuals, increased its S&P 500 target to 4,400 on Friday, indicating that it expects the indicator to remain at its record highs and rise another 5% by the end of 2021.
This feeling of economic enthusiasm led to a strong long-term withdrawal US government bonds during the first quarter of this year. However, the direction of the journey has begun to change over the past two weeks.
The yield on the 10-year Treasury note, a key benchmark for fixed income markets, has fallen 0.14 percentage points over the past fortnight, to 1.6%, which was the biggest drop in this period of two weeks since last summer. . He performance, which is moving in the opposite direction of the price, had reached 1.77% on March 30.
The recent recovery in demand has left some investors and analysts scratching their heads, mostly because it has come even when data released Thursday showed U.S. retail sales rose a ten-month high last month. , while the number of Americans applying for unemployment benefits first has dropped to its lowest level since the beginning of the coronavirus crisis. Normally, this positive news would turn investors away from this shelter debt.
However, investors noted the growing foreign demand for the Treasury, which still produces more than many other global pairs, as one of the reasons for the sharp rise.
A strong 30-year Treasury bond sale on Tuesday helped instill confidence in the market from there had been concerns leading to whether investor demand would be enough to absorb a large wave of newly issued debt. Investors are expected to watch a 20-year $ 24 billion bond auction up close on Wednesday for more information.
Subadra Rajappa, head of US-type strategy at Société Générale, noted that the dramatic sell-off in the first three months of this year had left the market prone to a sudden rebound. “The U.S. Treasury’s immunity to ever-stronger data is proof that a positive outcome of growth and inflation is priced perfectly,” he said.
“We do not detect any significant change in the message sent to us by the Treasury market, but we also do not believe that yields are likely to recover an endless rise, as they are in line with their” fundamentals “,” added Roberto Perli, economist by Cornerstone Macro.
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