Rising for six consecutive sessions, the Dow Jones Industrial Average grew 4.1 percent for the week ending 12 March and closed at 32,778.64, its best week since November.
The S&P 500 added 2.6 percent last week, and the NASDAQ gained 3.1 percent, reversing a three-week string of losses, although it remained 5.5 percent below its 12 February peak of 14,095.
The gains were driven by the passage of President Biden’s $1.9-trillion stimulus program and his news that every American will be eligible to receive a COVID vaccination by 1 May and everyone wishing to be vaccinated can be by June, analysts said.
As the week closed, investors bailed out of government bonds, forsaking safe shelter and seeking higher profits in stocks. The sell-off drove bonds’ yield to 1.634 percent, its highest in more than a year.
The continuing rise in bond yields will force prices lower, hampering share prices of companies whose fortunes are tied closely to interest rates, such as tech firms, analysts expect.
Consumers’ positive outlook in March rose to 83 in the University of Michigan’s monthly survey of consumer sentiment, its highest in 12 months, compared to 76.8 in February.
Also in February, consumer spending grew 2.4 percent month over month, the largest bump since last August and another sign that a sustained recovery might have begun.
Today, the Dow snapped a seven-day winning streak falling 129 points over the Federal Reserve’s upcoming policy announcement. As we have continually noted, the fear on The Street is that as inflation rises so, too, will interest rates, thus ending the roaring market splurge.
TREND FORECAST: The word on Wall Street is that the more people get vaccinated, the stronger the economy will grow. As of today, according to the CDC, 11.5 percent of Americans have been vaccinated. Thus, while there will be more confidence among the general population to reemerge into society once most of the nation gets vaccinated, we maintain our forecast that the U.S. economy will temporarily spike higher as the nearly $2 trillion in government money flows through the system.
But, again, the booming markets and economy will decline as inflation rates move higher and interest rates climb. Thus, the question remains: What new schemes undreamed of will Washington and the Federal Reserve create to keep the artificial equities bubble inflated?
GOLD/SILVER. Gold, at $1,730 per ounce, and silver at $26 are still trading in the range they were last week.
As we continue to note, much of the investment that would be earmarked for precious metals has flowed into the cryptocurrency markets, which is “gold” for the younger generations.
TREND FORECAST: Since gold’s recent decline, we have now identified its low breakout point at $1,650 per ounce. Should it hit that level, the downside risk is around $1,550 per ounce. As for silver, should it break below $22 per ounce, the downside risk is in the $17 per ounce range.
Considering silver is the most efficient conductor of electricity and its strategic demand in both hi-tech and heavy industry, we do not forecast it will break below that range.
We maintain our forecast for gold to break above $2,100 per ounce this year and silver to move above $50 per ounce.
BITCOIN. Bitcoin, after spiking to $60K per coin, is trading in the same range as last week. We maintain our 5 January forecast: “The downward breakout point will be hit should the price fall below $25,000 per coin.”
OIL. As with gold, silver, and Bitcoin, oil prices, while down for three consecutive days, are still hovering around last week’s trading range at $68 per barrel for Brent Crude. The pullback today is attributed to a slower than expected economic rebound in Europe after over a dozen countries stopped injecting their citizens with the AstraZeneca vaccine… which we have reported about in this issue.
And, supply continues to outstrip demand, as noted by rising oil stockpiles in the U.S. as crude inventories increased by 12.8 million barrels in the week to March 5. The Street had predicted an increase of fewer than 1 million barrels.
TRENDPOST: As we have noted, should military tensions break out in the Middle East and oil prices spike toward the $100 per barrel range, it will be a spark that could crash equity markets and drive the global economy deeper into the “Greatest Depression.” In this issue of the Trends Journal, we highlight some of the dangers ahead as Israel ramps up its military actions against Iran. (See “ISRAEL TARGETS IRANIAN OIL SHIPMENTS TO SYRIA.”)
TRENDPOST: Citing Asian economies’ continuing recovery and the U.S.’s new $1.9 trillion in economic stimulus, the OPEC oil cartel has raised its forecast for daily global oil demand by 200,000 barrels to an average of 4.9 million barrels a day in 2021.
The group also added 0.3 percent to its global growth forecast for the year, raising it to 5.1 percent.
The 37 advanced nations belonging to the Organization for Economic Cooperation and Development have cut their oil oversupplies to 46 million barrels above the average from 2015 through 2019, OPEC noted.
An economic recovery would reduce inventories further, especially in light of OPEC’s decision earlier this month to not increase current production levels. (Russia and Kazakhstan were permitted small boosts in output.)
The economic collapse last March cut world oil demand by 6.9 million barrels a day, sending prices below $30 a barrel for a time. With recovery on the horizon, prices have jumped back to pre-pandemic heights, with benchmark Brent crude closing 12 March at $69.23.
