26 Mar March 26, 2021
Week in Review
Suez
The container vessel Ever Given ran aground in the Suez Canal and is blocking all shipping through the canal. Other ships are queuing up at the canal, and a few have diverted to travel around the Cape of Good Hope. Shipping rates have spiked as expected available shipping capacity has dropped due to ships having to wait to transit the canal. Thus far there has not been a spike in crude prices or in the spread between WTI and Brent crude even though a very significant portion of crude shipped from the Gulf States to Europe transits the canal.
Our Take: If the Ever Given is refloated and the canal reopened relatively quickly then the macroeconomic impact of the closure will likely be relatively limited. A longer closure is likely to cause significant disruptions to multiple global supply chains, including those of the energy and petrochemical industries. Also, the muted reaction of crude prices is likely an indicator of the strongly negative impact of European lockdowns on economic activity there.
Personal Income and Consumption
Personal income fell 7.1% in February while spending dropped 1.0%. January spending was revised to a 3.4% increase from the previously reported 2.4% gain.
Our Take: Government stimulus is wreaking havoc with reported income numbers. January stimulus led to a 10.1% increase in income, only to be reversed out somewhat in February. The new round of stimulus in March should drive large gains in income next month. Spending during the month fell much less than incomes as consumers were able to dip into savings to support spending. Fiscal stimulus should lead to solid GDP gains in the short-term, but improvements in the employment picture are necessary for more sustainable (non-stimulus related) growth.
Municipals
Moody’s Investors Service raised its outlook on U.S. college and university debt from negative to stable. Moody’s cited the increased federal funding along with the “potential for students to return to campus in greater numbers in fall 2021” as some of the reasons for the outlook change.
Our Take: As COVID-19 cases drop and more of the population becomes vaccinated, it is expected that more students will be back on campus. A return to some semblance of normalcy as well as increased funding at the state and federal level should help colleges and universities recover from the effects of the pandemic.
All expressions of opinions are subject to change without notice in reaction to shifting market conditions. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice.