Weekly CEF Market Report - June 27, 2021
Weekly CEF Market Report - June 27, 2021
Public Version- Not For Subscribers
Macro Picture
The major indices had their best week since March after having their worst week since January. New highs were recorded on both the S&P 500 and the Nasdaq but on low volumes. Oil prices reached their highest levels since October 2018. Utilities and real estate continues to lag.
Performance in energy continues to do well as oil prices reach ever higher levels. This will last for awhile until rigs and production catch up. Drillers are still reluctant to commit new capital to projects given the pain they received last year when oil tumbled below $30 a barrel.
The market is being driven by fears of inflation, tapering, and the first rate hike. The time line looks to be getting clearer which could be helping the equity markets. There are moderating inflation fears as there are some signs supply chains are easing, especially in commodity areas like lumber, are helping.
On Thursday, Bloomberg noted that used car prices may have peaked and that retail vehicle prices might soon follow. Those two variables contributed one-third of the increase in consumer prices in the last quarter.
Still, inflation rising to the fastest level since 2008 will continue to be an overhang to the market until later this year when the CPI yoy effects start rolling off.
I continue to hold Invesco Small Energy ETF (PSCE) in my account which was up 10% in the last week and 21% in the last month. I think the value/cyclical trade should continue to work for the remainder of the summer- at least. For value stocks my two go to investments has been Yacktman Fund (YACKX) and iShares Value ETF (VLUE) for larger cap equities. For small cap, I mostly use Vanguard Small Cap Value (VIOV).
I did add to some of my individual equities buying up some Crowdstrike (NASDAQ:CRWD), Spotify (SPOT), ZOOM Video (ZM), and Teledoc (TDOC).
Commentary
Discounts were again up on the week with taxables getting near their interim highs at +0.70%. Munis continue to power higher as well closing at their tightest levels in several years at -0.68%. Munis are, by far, my largest CEF allocation but I understand due to personal circumstances, they are not for everyone.
Taxable munis look okay here too. The risk, of course, is that rates jump back higher. However, I don't own munis for the market value changes- but for the income streams. Long-term, I've noticed the market value changes tend to offset. Blackrock Taxable Muni (BBN) is my favorite in that space near par.
The muni side of things - taxable or not- are becoming more expensive by the day. They now reached the top 5 z-score threshold with a +1.7 and single states at +1.9. But remember, these are one-year numbers and a year ago investors were worried about rising interest rates hitting NAVs.
I still think the muni space is heading to..............
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