Market Share Newsletter Vol 3 Issue 9


April 27, 2021

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In our last edition of The Market Share we discussed investments that have recently topped headlines. Since Special Purpose Acquisition Companies (SPACs) are creating such a buzz in the media and our clients want to know more, I’ve asked our Director of Research, Rob Romano, CFA to share more information with you below. As always, if there is a topic of interest you would like addressed, please let us know!
Read Senior Fixed Income Portfolio Manager, Erik Clapsaddle’s, insights into the Economy, Equities and Fixed Income markets by clicking on the “More Insights” links where he covers the housing market, the recent census data and more! Thank you for following our commentary.
Paul Gifford, CFA


A “SPAC” is a Blank Check Company with no business entity. The SPAC process is an alternative to the initial public offering (IPO) or a way for the shell corporation to purchase a private company and take it public. The SPAC process has been around for several years, but recent interest from several high-profile investors has seen the momentum behind SPACs reach levels never seen before.

The popularity of SPACs has seen tremendous growth. In fact, in 2020, 247 SPACs were launched versus 55 in 2019. Last year, SPACs accounted for half of all initial public offerings. The growth continued in the first quarter of 2021 with more than 300 SPACs announced, raising $88 billion—double the amount raised in the fourth quarter of 2020. We have seen SPACs purchase companies with a concept or idea that addresses a large market opportunity with little to no revenue or profit, such as an electric vehicle company or a biotechnology company. Companies brought public through a SPAC include DraftKings, QuantumScape, Nikola Motors, and Virgin Galactic. Two weeks ago, the largest ever SPAC deal was announced, “Grab” a Southeast Asian ride-hailing company will go public at $39 billion. However, all SPACs are not created equal and many will fail to become successful public companies. Increased scrutiny from the Securities and Exchange Commission (SEC) is meant to inform investors that they may not be fully aware of the potential risks.

The benefits of a company going public through a SPAC include; an accelerated process of becoming public, less regulation and documentation to file with the SEC, and the ability to attract long-term high-quality investors. Private companies are attracted to SPACs as they offer access to the public markets without the burdensome initial public offering process. The SPAC process of taking a company public is likely to continue to play a role in the future as an alternative to the traditional initial public offering. The size of this role will depend on how successful they are in attracting companies that will mature into profitable and cash flow-generating enterprises.

SPACs have garnered our attention as a new way for companies to go public instead of the traditional initial public offering. As financial innovation continues to develop new investment opportunities and risks, we continue to research which are viable and can add value to your portfolios. SPACs will not be the last innovation, but it is currently the one making news.

Rob Romano, CFA
Director of Research, VP and Portfolio Manager
Wealth Advisory Services
Considerations for your portfolio

The Economy

  • U.S. housing starts increased to an annualized rate of 1.74 million starts (their fastest pace since June 2006) and increased by 19.4% month-over-month after declining 11.3% in February. The biggest percentage increase in housing starts came from the Northeast increasing by approximately 129%. The spike was attributed to adverse weather conditions pushing housing starts from February into March. Building permits, which are a measure for future construction, increased this past month by 2.7%.
  • Initial jobless claims continue their decline as they dropped to 547K for the week ending April 22. This is the lowest level in weekly claims since the week ending March 13, 2020. As the economy continues to recover, we expect the hospitality and leisure sector to start adding a notable amount of jobs to the labor markets. After a precipitous decline in hospitality and leisure payrolls in the United States, they have increased by 664K over the past two months.
  • China’s National Bureau of Statistics released data that showed industrial profits increased by 92.3% over March 2020. Over the first three months of the year, Chinese industrial sales increased by 38.7% year-over-year (YoY).
  • The Census Bureau released their reapportionment figures for the U.S. House of Representatives on Monday. The reapportionment process happens once every decade. Texas increased their number of seats in the House by two, while Florida, Oregon, Montana, Colorado, and North Carolina all increased by one. California, Illinois, New York, Ohio, Pennsylvania, Michigan, and West Virginia all lost one seat.
  • First quarter GDP will be released this Thursday and is forecasted to increase by 6.9% relative to the previous quarter, and personal consumption is expected to increase 10.5%.
Economic Data: Recent
  Actual Survey Prior
Retail Sales Advance MoM 9.8% 5.8% -2.9%
Industrial Production 1.4% 2.5% -2.6%
Housing Starts 1739k 1613k 1457k
Consumer Confidence (Conf. Board) 121.7 113.0 109.0
Economic Data: Upcoming
    Survey Prior
Change in Nonfarm Payrolls   900k 916k
FOMC Rate Decision   0-0.25% 0-0.25%
ISM Manufacturing   87.5 86.5
Consumer Price Index (MoM)   0.2% 0.6%
Unemployment rate
Source: Bloomberg


  • Eli Lilly & Co reported a slightly disappointing first quarter as revenues and earnings both missed consensus. Earnings per share (EPS) were $1.87 but were forecasted to be $2.14. Eli Lilly stock moved lower this morning as they missed both earnings and revenue expectations, but they reduced their sales guidance in 2021 due to lower than expected COVID-19 antibody sales as the United States canceled a deal to purchase hundreds of thousands of doses.
  • According to FactSet data, 84% of S&P 500 companies have reported surprise, positive earnings and 77% have reported a positive revenue surprise (25% of the S&P 500 companies that have reported quarterly earnings). The financial sector has had an excellent quarter as Goldman Sachs reported $18.60 per share vs. an estimate of $10.22 per share and Discover Financial Services reported $5.04 vs. a $2.83 estimate.
  • Crocs, the famous manufacturer of odor-resistant foam clogs, reported an excellent first quarter as revenues grew by 64% YoY to a record $460 million and EPS increased to $1.47 from $0.16 during the first quarter of 2020. The most astounding part of the quarterly release from Crocs was the increase in their sales growth guidance for 2021 to 40-50% from 20-25% that they previously stated. The stock opened as much as 12.9% higher than the previous close.
Equity Index Values and Total Returns
  Value YTD 1-Year
S&P 500 4,187.6 11.99% 47.67%
Dow Jones Industrial Average 33,981.6 11.65% 43.61%
NASDAQ Composite 14,138.8 9.91% 62.66%
Russell 2000 (small-cap index) 2,298.0 16.65% 81.77%
MSCI EAFE (developed intl.) 2,298.3 8.10% 45.42%
MSCI Emerging Markets 660.5 5.82% 55.10%
Equities chart
Source: Bloomberg

Fixed Income, Commodities and Currencies

  • Interest rates have appeared to plateau for the time being as the 10-year U.S. Treasury note reached 1.77% on March 30, but has fallen back to a range between 1.55-1.60%. Despite the 10-year Treasury moving well off its pandemic lows of 0.31% on March 9, 2020, the yield on short-term bonds has barely moved as the Federal Reserve has been able to keep a lid on them. Over the same time frame, the yield on the 2-year Treasury has declined from 0.24% to 0.17% today.
  • Italy sold $4.5 billion of bonds maturing on November 29, 2022 with a coupon of 0% and a yield of -0.30%. The continued negative-yielding government bond experiment rages on to the tune of $13.7 trillion around the world.
  • The price of copper future contracts has surged to almost $10,000, its highest level since 2011. The increase on the price of copper has been driven by investor sentiment surrounding a global economic recovery. Other commodities have also rallied over the past 12 months as the price of crude oil has increased by approximately 169%, natural gas 51%, corn 75% and soybean 63%.
Fixed Income Index Yields & Total Returns
  Yield YTD 1-Year
B’berg Barclays Inter Govt./Credit 0.92% -1.34% 1.41%
B’berg Barclays US Aggregate Bond 1.51% -2.48% 0.14%
B’berg Barclays US Corp.High Yield 3.94% 1.83% 20.66%
B’berg Barclays Municipal Bond 1.00% 0.68% 7.21%
Key Interest Rates
  4/26/21 12/31/20 4/28/16
Federal Funds Target Rate 0-0.25% 0-0.25% 0.25-0.5%
3-Month LIBOR 0.18% 0.24% 0.64%
2-Year U.S. Treasury Note 0.17% 0.12% 0.82%
10-Year U.S. Treasury Note 1.57% 0.91% 1.85%
Prime Rate 3.25% 3.25% 3.50%
Commodities & Currency
  4/26/21 12/31/20 YoY Change
Gold 1,780.1 1,902.8 2.87%
Crude Oil 61.9 48.5 387.17%
Natural Gas 2.79 2.54 56.35%
Corn 680.5 484.0 126.19%
Soybean 1,569.0 1,315.3 89.20%
USD: Euro 1.209 1.222 11.59%
The information in this email was prepared from sources believed to be reliable; it is for informational purposes only and does not provide recommendations based on the investment objectives, financial situation, or needs of any individual or entity. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets. The information in this email is not a comprehensive statement of the matters discussed. Unless specifically indicated otherwise, this email is not an offer to sell or a solicitation of any investment products or other financial product or service or a confirmation of any transaction. If you have questions about the information in this email, please contact your trust administrator at 1st Source Bank Wealth Advisory Services or call 800 882-6935. Investment and Insurance products are:
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