The market has traded sloppily and continues to try to find short-term direction, but the HCM-BuyLine® remains strong, even with the volatility. It is always uncomfortable to buy when markets are trading like this, but think longer-term than just a week, and you might find some nice bargains in all the turmoil. 

The travel and entertainment sector should benefit nicely from the re-opening of the economy. Europe announced today that they will be re-opening to travel without any quarantine starting late this week. Cases are dropping and dropping fast. U.S. daily cases could fall below 10,000 by the end of May. U.S. daily deaths could fall below 225 per day, or the lowest since the start of the pandemic, and the CDC could lift restrictions on cruise lines and other of the hardest hit industries in the coming weeks.  

In other words, the U.S. could see a full reopening very soon. We think this could drive positive surprise, as a number of Americans and a number of investors still believe the US could re-lapse into a new shutdown at any time. We do not see this happening. The vaccine either works or it doesn’t, and so far all indications are that the vaccine is very effective. 

As we said above, cash on the sideline has built up and is still building. The cadence of incoming data looks set to be accelerating to the positive side, and institutional money market cash is now $3.065T, nearly matching the record peak in May 2020. The divergence involves the seeming dichotomy between improving economic momentum versus soaring institutional cash balances (aka “dry powder”).

Housing starts declined 9.5% in April to a 1.569 million unit annual rate, below the consensus of a 2.2% pullback to a 1.7 million unit rate. Additionally, the prior three months were revised down by a total of 33,000 units. On a three-month average basis, however, starts edged down only modestly and are still near their highest level since late 2006. The surge in lumber and other building material prices is likely holding back some starts, but the impact is mitigated by the low housing inventory, low mortgage rates, and favorable demographics which are positive for new construction activity, as implied by the near record high homebuilder confidence.