Weekly Market Commentary

March 3, 2021

 

The Markets

Financial markets had a historically unusual event last week.

On Thursday, the yield on 10-year U.S. Treasury notes briefly matched the dividend yield for the  (S&P) 500 Index. This type of convergence is uncommon. In normal times, the yield on 10-year Treasuries tends to be higher than the dividend yield of the S&P 500.

These, however, are not normal times.

Throughout much of 2020, the S&P 500 Index offered investors a income comparable to, or higher than, 10-year Treasuries. This reflected the Federal Reserve’s accommodative policy, which kept the fed funds rate near zero to support the economy through the pandemic. Since August 2020, however, the interest has been creeping higher despite the Fed’s actions. Last week, it closed at 1.46 percent.

Rising Treasury yields suggest bond investors think the economy is likely to strengthen and pent-up consumer demand could spark spending on shopping, dining, and social events. The concern is a spending spree may lead to higher inflation. We will be keeping a close watch on this issue but will wait for the data to confirm a trend vs the mass media reports which are often wrong.

And the most expensive cities in the world are… Every year, The Economist Intelligence Unit reports on the worldwide cost of living by surveying the cost of 138 goods and services in major cities around the world.

As of September 2020, prices were up just 0.3 percent, year-to-year. The cost of consumer staples remained fairly steady, overall. However, the prices for recreation (which includes personal electronics), personal care, tobacco, alcohol, and domestic help, increased. The report stated:

“Amid the pandemic, price-conscious consumers have also opted for cheaper products in many countries, increasing price competition for less-expensive goods…On the other hand, high-earning consumers have been comparatively unaffected by the pandemic. While they are likely to shop less, prices of premium products have remained resilient. Supply-chain problems have also had differing impacts on different goods, pushing up the price of high-demand products such as computers in some cities.”

Regionally, prices fell in Latin America, North America, Eastern Europe, and Africa. They increased in the Middle East, Asia, and Western Europe. The EIU’s World Cost of Living Index found, during 2020, the most expensive cities in the world were:

  • Paris, France
  • Hong Kong, China
  • Zurich, Switzerland
  • Singapore, Malaysia
  • Osaka, Japan
  • Tel Aviv, Israel
  • New York, United States
  • Geneva, Switzerland
  • Los Angeles, United States
  • Copenhagen, Denmark

The least expensive were:

  • Damascus, Syria
  • Tashkent, Uzbekistan
  • Almaty, Kazakhstan
  • Buenos Aires, Argentina
  • Karachi, Pakistan
  • Caracas, Venezuela
  • Lusaka, Zambia
  • Chennai, India
  • Bangalore, India
  • New Delhi, India

 Focus On The Positive

“The wish to travel seems to me characteristically human: the desire to move, to satisfy your curiosity or ease your fears, to change the circumstances of your life, to be a stranger, to make a friend, to experience an exotic landscape, to risk the unknown.” –Paul Theroux, Travel writer and novelist