top of page
Scott Poore, AIF, AWMA, APMA

Equities Rotate as Inflation Marches Higher


Equities were somewhat mixed last week, as investors rotated away from expensive growth stocks. Over the last 3 months, flows into Real Estate, Utilities, Consumer Staples (defensive), and Basic Materials have been the highest within the sector ETF space, according to ETF Database (etfdb.com). Categories among the lowest flows, or rather, outflows, have been Broad Technology and Consumer Discretionary. Two of the larger sectors of the S&P 500 Index are Technology and Consumer Discretionary, causing the index to experience a rotation within from expensive names to under-valued names.


It’s early in the earnings season calendar, but so far, 65% of companies have cited labor

shortages as the primary negative impact on 1st quarter earnings. In addition to labor shortages, oil and material costs have negatively impacted earnings. Last week, Amazon reported effective April 28th a 5% surcharge to sellers on Amazon for fuel and inflation costs. Wonder who will bear the cost of the surcharge—the end customer, perhaps?


Meanwhile, both measures of inflation—PPI & CPI—showed an increase in March. In fact, the gap between the two is still high (2.9%) and increasing. That means higher inflation is likely to stick around.

The consumer is still spending and March Retail Sales showed a 5% increase last month. In addition, the preliminary reading on April Consumer Sentiment showed marked improvement. As long as the consumer continues to make discretionary purchases, growth will follow. First quarter GDP is tracking to be approximately 1% or greater. After a brief respite below $100/barrel, oil is now priced at $106/barrel. A busy week plus the Fed Chairman speaking will make trading interesting.


Opmerkingen


bottom of page