One Pretty Tasty Partnership

While the week was decidedly more volatile, it ended on a positive note.  For those paying close attention, we’ve experienced a bit of rotation in the markets these past few weeks.  This is most evident if we look at the YTD return on the Nasdaq which dipped slightly negative this week after having been up as much as 9% just three weeks ago.  By contrast the Dow Jones Industrial Average and S&P 500 indices are up 2.6% and 2.0% respectively.  While it may not feel great watching our beloved tech stocks fall from grace, it is worth pointing out that through diversification we’ve participated in the rotation as the financial and energy sectors are up 12% and 34% respectively.  While it is certain that technology is here to stay, it is nice to see other sectors take a lead now and again.

Let’s start with the best news this week.  The jobs report was released today and blew past estimates with an astounding 379,000 jobs created in February.  Expectations were for 180,000 jobs added which would have been a tremendous improvement over January’s paltry 49,000 add and December’s 227,000 loss.  While the unemployment rate fell only modestly to 6.2%, likely due to people re-entering the job market, it bodes well for the next few months.  This is due, in no small part, to the vaccine rollout happening faster than had been anticipated.  It now looks like everyone who wants to be vaccinated will have the opportunity by the end of May.  The reopening has commenced and with it concerns of inflation.

While we’re on the subject of inflation, you may have notice the yield 10-yr Treasury has risen significantly.  While we are far away from the Federal Reserve raising interest rates, it has several tools at its disposal.  The most obvious is that it could slow and eventually end its bond buying program, which amounts to $120 billion per month.  But more interestingly, there is talk of reviving “Operation Twist”, last used in 2011, which would see the Fed buying long-dated Treasuries and selling short-dated Treasuries, thereby twisting the yield curve to a flatten it.  When asked directly, Chairperson Jerome Powell didn’t rule it out although he was ambiguous with his answer as is normal for the Fed.  For what it’s worth, I don’t see the Fed shifting policy just yet.  As quick as the move in the 10-yr yield has been, 1.55% is still quite low by both historical and absolute measures.  However, if the yield curve continues to steepen, it is a tool that is on the table.

With the pandemic in retreat, the signs of a reopening are everywhere.  One that surprised me is that global carbon emissions have now topped pre-pandemic levels.  Without getting into the politics of climate change, even the American Petroleum Institute is preparing to endorse setting a price on carbon emissions.  I’ve talked about the quickly approaching transition to electric vehicles, but one area that has been slow to follow is electric charging stations.  After all, what good is an EV when you can’t charge it conveniently.  This week five of the largest utility companies including American Electric Power, Dominion Energy, Duke Energy, Entergy, Southern Company, and the Tennessee Valley Authority have unveiled a partnership to enhance access to electric vehicle charging stations across the United States.  The companies will each take steps to provide EV charging solutions within their service territories.  For years now, the question has been one of the chicken and the egg.  While it now seems settled that the EV came first, it is now a matter of building out the infrastructure to support this transformation.  Each day brings us closer.

In closing, I bring you a story that seems incredulous (at least to me).  I really thought it was an April Fools' joke until I confirmed it with multiple sources.  It appears Chipotle and e.l.f Beauty are partnering on a new makeup collection.  The companies plan to launch a limited-edition makeup collection next week featuring products that include Chipotle eyeshadow palette, Make It Hot lip gloss, Extra Guac face sponge set, and Eyes Chip Face Makeup bag.  ELF marketing exec Kory Marchisotto said, “There is nothing tastier or prettier than the combination of burritos and makeup!”  Who am I to judge?  Now you know.

Bruce J. Mason, MBA