Welcome to the first edition of Five in Five, a new monthly publication from the Investment Team at BTC Capital Management. Each month we’ll share five graphs that illustrate the current state of the markets, with brief commentary that can be absorbed in five minutes or less. We hope you find this high-level commentary to be beneficial and complementary to Weekly Insight and Investment Insight.
Graphs from this month’s Five in Five cover the following topics:
- The initial estimate of second quarter GDP growth registered strong at 6.5% (GDP, QoQ% SAAR) but slightly lower than the expectation of 8.4%.
- Increased spending on services, a beneficiary of the economic reopening, was evident with growth of 12.0% (PCE: Services).
- Government spending declined for the quarter as nondefense federal spending dropped 10.4%.
- Lack of supply led to a lower contribution from the housing sector.
- Inventory liquidations reduced growth by 1.1 percentage points.
- The number of workers willing to leave their current jobs remains elevated.
- Conference Board data (blue shaded area) indicates jobs continue to be easy to find.
- Despite the number of workers willing to leave their current jobs and the ease of finding a new one, companies are still struggling to find qualified candidates in numerous fields.
3. Fixed Income
- Despite the recent uptick, the yield spread between high yield bonds (often referred to as junk bonds) and U.S. Treasury issues continues to be tight.
- Confidence in future economic growth and an ongoing search for yield continues to keep yield spreads narrow.
- Equity valuations continue to be elevated, both domestically and internationally.
- Domestic stocks have historically had higher valuations versus international markets.
- Strong earnings growth and low interest rates provide valuation support for equity markets.
5. Earnings Growth
- To date, second quarter earnings reports are coming in above estimates with 88% of S&P 500 Index components beating expectations.
- Information Technology and Health Care are registering the strongest results with over 95% of companies reporting exceeding expectations.
Source: BTC Capital Management, Bloomberg LP, Ibbotson Associates, FactSet, Refinitiv.
The information provided has been obtained from sources deemed reliable, but BTC Capital Management and its affiliates cannot guarantee accuracy. Past performance is not a guarantee of future returns. Performance over periods exceeding 12 months has been annualized.
The information within this document is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Statements in this report are based on the views of BTC Capital Management and on information available at the time this report was prepared. Rates are subject to change based on market and/or other conditions without notice. This commentary contains no investment recommendations and you should not interpret the statement in this report as investment, tax, legal, and/or financial planning advice. All investments involve risk, including the possible loss of principal. Investments are not FDIC insured and may lose value.