Week of Mar 07 2021 (Roll)

Market Wrap

Narratives

Central banks are engaged in debt monetization; and that’s been true for a long time. What’s new is that the “match” between government borrowing and central bank bond-buying has become so glaring following the pandemic that the charade is becoming difficult to obscure. This is not just a short-term response to the pandemic. This super-expansionary policy nexus is here to stay until policymakers are forced to reverse course. The extreme fiscal stimulus sets the markets up for a burst of strong growth that has already been more than fully discounted by investors, raising the risk of a cliff-edge towards the end of the year - Albert Edwards, SocGen

Week Ahead

The US Senate will be debating and voting on the President Biden's $1.9 trillion coronavirus aid bill during the weekend, and send it back to the House to be signed into law. Elsewhere, monetary policy meetings in the Eurozone and Canada will be keenly watched, as well as updated GDP figures for Japan, the Eurozone, the UK and South Africa. Other important releases include US, China and India inflation data; US and Australia consumer sentiment; UK and China foreign trade; Eurozone and India industrial output; and Japan current account.

Earnings

129 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls from December 15 through March 5. This number is the highest overall number of S&P 500 companies citing “ESG” on earnings calls going back at least 10 years. The previous record was 79, which occurred in the previous quarter. On a quarter-over-quarter basis, 50 more S&P 500 companies cited “ESG” on earnings calls in Q4 2020 relative to Q3 2020, which also reflects the highest quarterly increase in the number of S&P 500 companies citing “ESG” on earnings calls going back at least 10 years. The previous record was 40, which occurred in Q4 2019 - FactSet

At the sector level, all 11 sectors recorded an increase in the number of companies citing “ESG” on a quarter-over-quarter basis. The Industrials (+10), Health Care (+8), Financials (+7), Information Technology (+7), and Real Estate (+6) sectors witnessed the largest increases in the number of companies citing “ESG” on earnings calls in Q4 compared to Q3. These five sectors accounted for 76% (38) of the total increase (50) for the index.1

Moreover, 154 S&P 500 S&P 500 companies cited “Biden” or “administration” (in reference to the Biden administration) on earnings calls for Q4 2020. For these 154 companies, the government policy that was cited or discussed by the highest number of S&P 500 companies (50) in conjunction with their comments on the Biden administration was climate change and energy policy.

Thus, is it possible the change in presidential administration contributed to the large increase in the number of S&P 500 companies citing “ESG” on earnings calls in Q4 2020 compared to Q3 2020? Of the 129 S&P 500 companies that cited “ESG” on earnings calls for Q4 2020, 48 also cited “Biden” or “administration” on the earnings call. Of these 48 companies, 26 discussed climate change and energy policy in conjunction with their comments on the Biden administration - FactSet

S&P 500 Futures

Bull vs Bear

This Week

Bulls will seek to break and hold above 3850.00 and ideally back above the TR 3662.50 - 3862.50 HI (+0.62%). Strong position of close favors continuation. Cessation of 1TFD on WTF (> 3912.00, +1.9%) would be ideal, but an Inside Week is equally likely.

Last Week

Bulls will seek to hold above 3785.00 and ideally back above the Axis Line 3835.00. ITF trend reinstatement will require a break and hold above 3862.25 (+1.39%).

Bears will seek to break and hold back below 3800.00 (-1.02%) on a closing basis, and ideally below 3757.50 (-2.12%). Bears could posit WLO 3720.50 (-3.09%) as being weak relative to the February LO with 2 single-prints remaining just below.

Bears will seek to break and hold below 3757.50 (-1.36%) on a closing basis, and ideally below 3747.75 (-1.63%) to create the condition for eventually retesting 2021 low (-4.11%).

Indicators