Notes on the Week Ahead

The all-boys Catholic school where I spent my formative years was a traditional establishment.  The air was thick with chalk dust and a steady tension between a rebellious student body and an establishment which resorted to corporal punishment to maintain discipline.  However, a second line of defense for the authorities was the issuance of report cards every six weeks.  Twice a quarter, the Headmaster would stride into the class room brandishing a batch of colored cards to be signed by parents and returned.  A rare pink A-Card, containing all 8s and 9s would be a cause of domestic celebration.  A B-Card, colored blue, would contain some 7s and would generally receive little comment from my parents.  A green C-Card, was a more serious matter requiring more elaborate explanations at home.  For most of my school career, it was B-cards, but the Headmaster seemed to enjoy my nervousness as he toyed with the cards before revealing my fate.   

Last Friday’s April Jobs report was clearly much weaker than expected. On average, analysts expected a payroll job gain of 1,000,000, with the unemployment rate falling from 6.0% to 5.8%. In the event, non-farm payrolls rose by just 266,000 and the unemployment rate rose to 6.1%.

On May 22nd, my wife and I plan to eat dinner at a restaurant.

In normal times, such a news item would not exactly make the family headlines.  But since the pandemic struck, we have taken a cautious approach and eaten at restaurants only once or twice and then only if outside dining was available.  For the last six months, a New England winter has deprived us of even that option.

However, on Wednesday, Sari got her second shot and I get mine on May 8th.  And so, two weeks later, I can already see myself perusing an oversized menu at a favorite restaurant.  Everything will look good and my only problem will be maintaining some restraint.  While the bread, the wine, the appetizers, the salad, the steak, the pommes frites and the molten chocolate cake will look equally appealing at the outset, I fear their cumulative implications for a digestive system which has only a distant memory of such bounty.

Memories of the great inflation of the 1970s have faded in the public’s consciousness.  Half of today’s population wasn’t even born when inflation stalked the land and, in the decades since, the failure of inflation to reappear has naturally eroded interest in the subject. 

On Friday, I had the privilege of speaking at the annual strategic investment symposium run by the College of Charleston in South Carolina.  Sadly, like everything else over the past year, the conference was virtual and so I couldn’t revisit Charleston itself.  Just to rub it in, the host let me know that it was sunny day in Charleston, with a high expected in the mid-to-upper 70s.

The economy is experiencing the first effects of a powerful double-dose vaccine of broad inoculation and fiscal stimulus.  The reality is that forecasts remain very uncertain.  The pandemic recession had no modern precedent and so we have no good road map on the speed at which the economy might naturally recover.  In addition to this, we have no example of the impact of fiscal stimulus of this scale, aimed primarily at low and middle-income consumers.  What we can say is that early signs show the recovery is accelerating, suggesting a faster return to “normal” than many had dared to hope a few months ago.  While this is very good news in general, it brings with it challenges for investors in making sure their portfolios are positioned for the very different financial landscape of a post-pandemic world.

It has been, by any reasonable measure, an eventful first quarter. At the start of the year, the pandemic was raging and vaccines had barely begun to roll out. Today, despite a recent tick up in cases, the light at the end of the tunnel is looking brighter and closer. At the start of the year, a very contentious election seemed destined to be followed by political gridlock.

In recent months, falling political uncertainty, two powerful rounds of fiscal stimulus and the rollout of covid-19 vaccines have resulted in a long-anticipated rotation in markets. Since early November, value stocks have outperformed growth, small caps have outperformed large and international stocks have outperformed their U.S. counterparts, with each of these moves reversing a multi-year trend. U.S. long-term interest rates have been at the center of this move, with 10-year Treasury yields rising by almost a full percentage point between the day after the 2020 elections and last Friday.

The pandemic has had an unfortunate impact on my piano practice. 

In truth, I have never been a promising student - my musical efforts have always rather resembled roadwork on an overused urban highway - that is to say, not so much an exercise in inventive construction as one in increasingly inadequate repair.  Still, for some years, my piano teacher would relieve the general ear strain by suggesting some new tune for me to work on.

As a hungry child, growing up in a large family, some forays into cooking were essential.  My early rice-making experiments, however, were exercises in frustration.  I would start with a large sloshing pot of icy water and, having transported it to the stove with wobbly hands, I’d dump in a bag of rice and wait for results. It seemed to take ages for the water to heat up, as I peered down hopefully at the submerged pile of grain. Eventually, things would begin to bubble and steam, but long before the rice came close to “al dente”, the water had boiled down, exposing an island of uncooked rice, with an acrid burning smell emanating from the bottom of the pot.