Macro Commentary:
By: Ariel Segal
There was across the board economic strengthening last week with initial jobless claims reported below expectations and both retail sales and housing starts beating estimates. This is the lowest new unemployment applications number since the week of March 13th last year. The 9.8% increase in March for retail sales is the second largest increase since the measure started being recorded. This momentum is expected to continue as businesses reopen and vaccination rates increase.
President Biden’s tax proposal will concentrate on increased enforcement to target corporations and high-income individuals that use tax evasion techniques and loopholes to minimize their federal payments. Offshore activities will be more closely monitored by the IRS, in addition to several other areas of focus.
The central banks including the ECB and Bank of England are looking into the creation of a central bank digital currency. China and India have set plans to issue a digital currency, while the U.S. is still conduction research.
Over 894 million vaccine doses have been given worldwide, with 209 million of them being given in the U.S.
Fixed Income Market:
By Joseph Colleran
Fixed income Credit Markets saw another week of strong investor demand on the back of continued rising equity levels and a reversal in the UST market. On the week IG spreads tightened by another 3-5 bps and saw record sized new deals by the major US banks following their very strong Q1 earnings releases. JPMorgan led the parade with a new record of $13BLN on Tuesday, that record was short lived; however, as Bank America topped it the next day with a $15BLN offering. Both deals were met with strong demand by institutional investors and have tightened versus their issue spreads. For reference, JPM 11yr maturity was priced at UST10y +102bps, it is currently trading at +95bps. HY bonds were largely unchanged with continued strength in energy related names.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $2.6 BLN
IG Bond Funds up $6.4 BLN
HY Bond Funds down $0.1 BLN
Municipal Bond Funds up $1.8 BLN
Prior Week:
Domestic Equity Funds down $4.5 BLN
IG Bond Funds up $4.1 BLN
HY Bond Funds up $3.8 BLN
Municipal Bond Funds up $1.7 BLN
U.S Equities:
By: James Zurovchak
The equity markets continued their march higher last week as all three major indices posted gains. S&P (+1.4%) and DJI (+1.2%) again made new all-time closing highs and NASDAQ (+1.1%) is now within 50pts of its all-time closing high. All 11 GICS sectors finished up on the week. Utilities (+3.7%), spurred by 10yr UST yield falling below 1.60%, and Materials (+3.3%), buoyed by gold’s 2.5% rally, were the leading sectors along with Health Care (+3.0%). Communications (+0.2%). Industrials (+0.6%) and Financials (+0.7%) were the laggards, reflecting at least a pause in the previous sector rotation brought on by the re-opening/recovery of the economy. Growth eked out a gain vs Value +1.7% vs +1.2%. Small Caps were up in kind posting a 0.9% gain. Retail Sales were reported last week at an eye-popping level of 9.8%, reflecting the impact of the $1400 stimulus checks. Clothing stores, motor-vehicle sales and bars and restaurants showed the biggest increases. The big question is are these one-time pops or can the gains be sustained? And will this spending extend to the service sectors, such as travel and entertainment? These will be the focus in the days/weeks ahead.
Foreign Exchange:
By Anthony Minardo
The week begins with the US dollar trading marginally lower. The market continues to detect a correlation between the US dollar and the US treasuries. The dollar strength which resurfaced for most of March might have been premature and moved too fast too quick. Currently the market is respecting the Fed, however strong growth forecasts and the risk of higher inflation should see the US 10tsy continue to move back towards the highs of 1.77 over the coming months.
Financial Planning:
By Brian Stigliano
Funding Buy-Sell Agreements With Life Insurance
Among the many concerns of business owners is what happens upon the death of one of the owners. How will it affect the business, the other owners, and the surviving members of the deceased owner’s family? From a business standpoint, the remaining owners want to have continuity of ownership without the risk of inexperienced heirs owning a significant portion of the business. From a personal standpoint, the owners likely want to make certain that their families are financially sound upon their passing.
A buy-sell agreement funded with life insurance mediates those concerns. The agreement is a contract among the owners that requires the surviving owners or the business entity itself to purchase the deceased owner’s interest in the company. The contract would specify agreed upon terms for the heirs to sell the inherited interest in the business.
Life insurance is an ideal method for funding the agreement as it provides for immediate liquidity upon the death of an owner. The death benefits are also typically income-tax free. Lastly, there may be significant cost efficiencies as the premiums paid for coverage would likely be much less than the death benefit.
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