Zacks Investment Management

Zacks Investment Management provides insight into the biggest news stories, and key factors that we believe are currently impacting the market such as:

• Inflation comments from Treasury Secretary Janet Yellen
• Supply chain bottlenecks continue to hunt automakers
• The booming housing market, and sputtering commercial real estate

Treasury Secretary Janet Yellen Spooks Markets with Inflation Comment – Treasury Secretary Janet Yellen sparked some selling pressure in the equity markets Tuesday when she inferred that interest rates may need to move higher to keep the economy from overheating. She was referring to the effect that $4 trillion in additional government spending could have on growth, which in a sense also provided a talking point for those opposed to additional spending plans. For equity markets, there has been a recent history of downside volatility, over short stretches, any time someone at the Fed or Treasury implies any type of monetary tightening. Yellen’s comments sparked a similar outcome. Interestingly enough, Yellen walked back her comments later in the day, stating that “I don’t think there is going to be an inflationary problem, but if there is, the Fed can be counted on to address it.” Early signs are pointing to at least short-term inflationary pressures: consumer prices jumped 2.6% from March 2020 to March 2021.

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How to Navigate Through The Market Despite The Unknowns

This past year has proved to many investors that any market outcome is possible. Oil prices have seen a solid recovery, and Biden has passed the $1.9 trillion American Rescue Act, but what’s next? Questions may arise, such as: Are we on the road to full economic recovery? If so, how long will it take?

To better navigate through the market’s ups and downs, it’s important to be prepared for both the good and bad. In this report, we look at whether the bulls or the bears will dominate in 2021. We also take a look at:

• Oil is rebounding, but long-term outlook is bleak
• Fiscal spending that won’t quit
• 7 reasons to be optimistic in 2021

If you have $500,000 or more to invest and want to learn more, download your guide today!

Download Our Just Released, “May Market Strategy Guide”²

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Supply Chain Bottlenecks Continue to Haunt Automakers – Over 70 years ago, in 1950, a Toyota executive named Taiichi Ohno visited a U.S. supermarket and was amazed. He was impressed at how shelves were restocked as soon as they were emptied, even though storage at supermarkets was limited. Ohno’s amazement gave way to “just in time” inventory management for Toyota and other automakers. Instead of keeping warehouses full of steel and other components, supply chains were developed to have inputs needed to assemble cars without having to stock parts. Automakers have been following this model for decades, but the pandemic has turned the process on its head. Toyota has been stockpiling some parts up to four months; Volkswagen is building six factories to make its own batteries; General Motors is building a $2.3 billion factory to produce enough batteries for hundreds of thousands of vehicles a year; and of course, Tesla is disrupting the business model by seeking to lock-up access to raw materials, namely nickel. With the effect of the pandemic coupled with the Suez Canal fiasco and the storm in Texas, automakers have been struggling to obtain parts needed to manufacture cars. As you can see in the chart below, the inventory to sales ratio is the lowest it has been in over a decade.³

While the Housing Market Booms, Commercial Real Estate Sputters – Over the last year, one of the biggest economic takeaways was the “K-shaped” economic recovery. During the summer of 2020 and thereafter, the “K” referred to some parts of the economy thriving in the economy (namely, the digital economy), and others suffering greatly (hospitality, travel, retail). At this stage, the economy is now experiencing a broad-based recovery, but the “K” still exists in real estate. Spending on residential building (housing) rose for the 10^th straight month in March, and prices have soared over the last year. Meanwhile, nonresidential spending, which includes offices, hotels, factories, and so on, has dropped to its lowest level in two years. The recovery has not quite taken hold yet, as demand for commercial real estate remains light, and projects are stalled because of backlogs and rising prices for key materials.⁵

Will the Bulls or Bears Dominate in 2021? – The market has been very volatile for the past few months, and questions may arise, such as: Are we on the road to full economic recovery? If so, how long will it take? As you navigate through the ups and downs in the market, it’s essential to be prepared for what’s next.  

In our just-released May Market Strategy Report, we take a look at the key factors that are influencing the economy and markets as the year continues to unfold. We look at whether the bulls or bears will dominate in 2021 and we also focus on:

• Oil is rebounding, but long-term outlook is bleak
• Fiscal spending that won’t quit
• 7 reasons to be optimistic in 2021

If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!

Disclosure