| | | | | | | Presented By NetJets | | | | Axios Markets | | By Dion Rabouin ·Mar 22, 2021 | | Welcome to spring! Does it feel like spring where you are? It's still snowing in Denver. - Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,056 words, 4 minutes.)
🚨 Situational awareness: Leon Black is out at Apollo Global Management, the private equity and debt giant he co-founded in 1990, Apollo announced. (Axios) 🎙 "We cannot free ourselves unless we move forward united in a single desire." - See who said it and why it matters at the bottom. | | | | | | 1 big thing: Investor psychology is shifting to risk in a big way |  | | | Illustration: Annelise Capossela/Axios | | | | Money is flooding into U.S. equities, stock mutual funds and ETFs as more traders and investors follow the bullish calls from Wall Street banks and the Fed. Why it matters: The flows to equities mark a sea change in psychology from recent years when money consistently flowed out of equity funds as investors sought safety in bonds and money market funds even as stock indexes raced to record highs. By the numbers: U.S. equities generated record inflows last week, according to data from Bank of America, reaching a new high of $56.8 billion and a "staggering record" $68.3 billion into equities overall. - Inflows were more than triple the previous week.
What's happening: Investors have clearly embraced the concept of TINA (There Is No Alternative [to U.S. equities]) as fund flows have nearly evaporated for government bonds ($0.06 billion), muni bonds ($1.1 billion) mortgages ($0.3 billion) and global emerging market assets ($0.1 billion). Money market funds saw $9.9 billion in outflows, BofA's data showed. - Flows to those assets were similarly dry the previous week.
The big picture: Equity funds have seen weekly inflows in four of the past five weeks, including $21.5 billion for the week ending March 10 and $31.7 billion for the week ending Feb. 10, according to data from the Investment Company Institute, which tracks around $40 trillion of assets under management. - That flies in the face of recent history — 2019 saw $199.7 billion of equity fund outflows and 2020 saw $394.6 billion of outflows, per ICI's data.
Details: Prior to November equity funds saw net outflows for 20 straight months. - After November's brief pause, investors again yanked $33.0 billion out of stock funds in December and $30.7 billion in January, followed by $21.7 billion of outflows for the week ending Feb. 3.
Since then the tide has turned. Selling in U.S. Treasuries over the past month has pushed yields to their highest since January 2020 (prices move inversely to yields) while money has poured into stocks. - In stark contrast to stocks during 2019 and 2020, bond funds saw historic inflows, drawing in $458.5 billion and $445.7 billion for those years, respectively.
The bottom line: Investors were fearful of 2019's historic bull market and 2020's irrational run in the face of a pummeled economy. - The newfound exuberance could give the market another leg up, or it could be a contrarian indicator, meaning a selloff is coming.
|     | | | | | | 2. Catch up quick | | The IRS will give Americans an extra month to file their taxes — but that's barely going to be enough to help navigate the new code full of changes passed last year as part of the stimulus bills. The IRS has yet to issue concrete guidance on them or update its software to reflect them all. (Axios) AstraZeneca announced that its coronavirus vaccine was 79% effective at preventing symptomatic COVID-19 and 100% effective against severe disease and hospitalization in a Phase III trial. (Axios) Saudi Aramco, the world's largest oil producer, announced Sunday that its net profit fell by 44.4% last year to $49 billion. (CNN) The Fed will allow the supplementary leverage ratio (SLR) exemption to expire, meaning big Wall Street firms will have to count Treasuries and deposits held at the Fed as assets, likely forcing them to hold more capital or reduce their holdings of Treasuries or Fed deposits. (WSJ) | | | | | | | | 3. Central bank firing may deal "fatal blow" to confidence in Turkey |  Data: Investing.com; Chart: Axios Visuals The value of the Turkish lira fell by more than 15% against the dollar, reaching 8.48 lira per dollar after President Recep Tayyip Erdoğan fired yet another central bank governor over the weekend. What happened: Now ex-governor Naci Ağbal was relieved of his duties after a surprise 200 basis point increase of Turkey's interest rates last week as part of an effort to restore the credibility of the country's monetary policy and bring down inflation. - The currency had strengthened to 6.96 lira per dollar as recently as Feb. 21 thanks to Ağbal's embrace of orthodox monetary policies.
How we got here: Erdoğan fired central bank governor Murat Cetinkaya, who was seen as credible in the eyes of the market, in July 2019 and replaced him with Murat Uysal, who was seen as essentially an Erdoğan puppet. - Uysal was replaced in November 2020 by Ağbal after inflation surged and the lira hit its weakest ever against the dollar.
- Also in November Turkey's minister of finance and treasury, Berat Albayrak, Erdoğan's son-in-law, announced on Instagram that he would step down from both roles to spend more time with his family.
Where it stands: "The shock firing of central bank chief Ağbal over the weekend may deal a fatal blow to investor confidence in Turkey," Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a note to clients. - "After regaining investor confidence with a series of aggressive rate hikes, Turkey has snatched defeat from the jaws of victory."
Keep it 💯: "At this point, it doesn't matter who Ağbal's replacement is or what they say, as it's clear that Erdoğan is running the show," Thin continued. "USD/TRY is likely to test the all-time high near 8.58 from November, and could even surpass it." | | | | | | | | A message from NetJets | | Multiple ways to fly with NetJets | | |  | | | | The NetJets Card Program™ offers all-inclusive pricing and guaranteed access to the largest fleet in private aviation. Choose from multiple jet card options with the ultimate convenience of NetJets. Discover ways to fly with all-inclusive pricing. | | | | | | 4. New $25B deal will create the first Canada-US-Mexico railroad | | Axios' Ivana Saric writes: The railway group Canadian Pacific announced on Sunday that it has agreed to buy Kansas City Southern for about $25 billion, Reuters reports. Why it matters: The acquisition would create the first railroad network to connect the U.S., Canada and Mexico and open up opportunities for increased trade. - The new USMCA trade agreement, which replaced NAFTA, went into effect last year will likely increase manufacturing and agriculture trade, adding more certainty to the rail deal, per Reuters.
What they're saying: Patrick Ottensmeyer, Kansas City Southern's chief executive, said the deal could reduce the need for trucks to connect production sites, reports the Wall Street Journal. - "This company is going to have a North America rail footprint that is truly unmatched," Ottensmeyer added.
What's next: The deal still awaits the approval of the U.S. Surface Transportation Board, which has not looked favorably upon previous attempts by Canadian railroad companies to buy U.S. rail companies, per Reuters. - The STB review is expected to finish by mid-2022.
| | | | | | | | 5. Economists want climate action |  Data: NABE. Chart: Danielle Alberti/Axios In a semiannual economic-policy survey by the National Association for Business Economics, more than two-thirds of the 205 respondents said U.S. policy should do more to mitigate climate change. - "Seventy percent of respondents believe that economic policy should do more to mitigate climate change, while 55% believe that the federal government should enact a broad-based energy or carbon tax to boost government revenue," NABE survey chair Ilan Kolet, Institutional Portfolio Manager at Fidelity Investments, said in a statement.
Of note: NABE's survey also found that nearly half of all its members expect the Fed to raise interest rates next year, despite projections from the Fed and insistence from chair Jerome Powell that it will not raise rates until after 2023. | | | | | | | | A message from NetJets | | NetJets' most popular aircraft model | | |  | | | | NetJets' Cessna® Citation Latitude® is designed with your optimum comfort in mind. A new opportunity: This midsize favorite has a generous amount of cabin space and is now available through the NetJets Card Program™. Explore the world's finest fleet. | | | | Thanks for reading! Quote: "We cannot free ourselves unless we move forward united in a single desire." Why it matters: On March 22, 1869, Emilio Aguinaldo, a Filipino revolutionary general and the first president of the Philippines, was born. - Aguinaldo played a major role in revolutionary wars against Spain and the U.S.
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