February 24, 2021

Weekly Market Commentary
February 24, 2021


The Markets

It’s a contrarian’s dream come true.

Contrarian investors like to buck the trend. They buy when other investors are selling and sell when others are buying.

Last week, Bank of America delivered a contrarian’s dream. A monthly survey of 225 global asset managers, who are responsible for $645 billion in assets under management, showed the managers were almost fully invested.

The survey showed asset managers’, “…cash levels at the lowest since March 2013, global equity allocations at a 10-year high, and a record number of respondents reporting taking a ‘higher than normal’ level of risk,” reported Randall Forsyth of Barron’s.

Asset managers’ optimism reflects central banks’ monetary policies, governments’ fiscal stimulus programs, and positive signs of economic recovery.

•    Central bank actions are supporting low interest rates. Low interest rates encourage economic growth by making money inexpensive for companies and individuals to borrow. In the United States, the 10-year Treasury yield finished last week at -0.80 percent.

•    Government stimulus is flooding world markets with cash. “Although percentage cash levels held by investment managers are falling, they are not falling fast enough to keep up the rapid expansion of money still flooding the system…U.S. household savings at the end of 2020 were still almost $1 trillion above pre-COVID levels…,” reported Mike Dolan of Reuters.

•    Economic recovery is gaining steam. While the virus continues to be a risk, last week much of the economic data in the United States was positive, with retail sales exceeding expectations and manufacturing holding steady. Economic growth is forecast to be about 6 percent in 2021, reported Reuters.

Focus On The Positive

“I never made a dime predicting economic activity.” –Warren Buffett