Investor Insights

April 2021 Investor Report

Published: May 5, 2021Updated: August 5, 2021

By: Stash Graham

April was a good month for financial asset prices as we saw green across the board. This outperformance was consistent with the Aprils of the past as the month enjoys a history of positive returns. But as we approach “Sell in May and stay away,” investors are balancing their portfolios. Real assets, like commodities, continued bouncing back after a difficult start during the first 60 days of the year. Our gold tracking position, IAU, was up more than +5% on the month. Our commodities basket, represented by our place in the Invesco Diversified Commodity ETF (PDBC), was up more than +8% this month. Overall, the S&P 500 and Dow Jones Industrial Average were up more than +5% and +2%. The U.S. Dollar moved lower after the renewed commitment from the Federal Reserve to continue buying U.S. Treasuries and Mortgage-backed Securities, which increases the M2 money supply (increasing at a faster rate than the rest of the developed economies).

Overall, the stock market had a strong month despite Federal Reserve Chairman Jerome Powell’s noteworthy comment regarding the stock market’s overvaluation. “Some of the asset prices are high. You see things in the capital markets that are a bit frothy. That’s a fact. I won’t say it has nothing to do with monetary policy, but it also a tremendous amount to do with vaccination and reopening of the economy.” The algorithm-based trading machine immediately put selling pressure on the markets until the close on April 28th. It does make one ponder, if the Federal Reserve Chair, who usually is very tight-lipped about using words like this, is admitting to “frothy” or excessively high prices in stocks, then what does the intermediate future hold. While we are continuously researching and investing in new positions, we keep an eye on systematic market risks.

Consumer expectations continued to rise during the last 60 days. One of the essential components of the consumer survey, income expectations, increased for the eighth straight month. Income expectations provide a good forward-looking metric when projecting for consumer spending. Logically, this makes sense. If consumers expect to make more money in the future, they will likely be willing to spend more. One of the most aggressive sets of stimulus packages in the modern world has supported the economy over the last twelve months. What has not been determined is whether all of these expectations will continue to paint the rosy picture they forecast if the stimulus stops.

On that note, President Biden has announced another stimulus package to provide another boost to the economy. This stimulus package is different from all of the other COVID-related stimulus packages in that there are ways to pay for parts of the plan. Unfortunately, as investors in financial markets, the bill is partially being left to us. We will certainly monitor the chances of whether this plan as currently presented or some iteration of the plan will pass or not. Then there is the calculation involved in determining if it is a net win for markets. We know another stimulus plan would be good for the economy and promote further growth, but increasing capital gains taxes on the instruments that we invest in will discourage some future buying of financial assets like stocks. If cash inflows into the stock market dwindle and cash outflows maintain the same rate, it would be fair to assume downside pressure on the stock market. Does the good (economic growth) outweigh the bad (higher capital gains taxes on stocks)? To be determined. As of right now, the market does not seem to be concerned with capital gains taxes. 

Please see the following updates on existing positions held at the firm:

AT&T Inc. (Ticker: T)- AT&T reported solid earnings for the first quarter of the year, and the shares increased over +5% on the day of earnings (April 22nd). HBO Max rose to 44.2M domestic subscribers from the 4th quarter’s 41.5% on the media side. Worldwide, the streaming service is up to 63.9 million subscribers. In the communications space, the company saw a net 595,000 postpaid phone subscribers increase.

Old Republic (Ticker: ORI)- On April 6th activist investor Owl Rock went public with a plan calling for shareholder-friendly governance and a more aggressive plan to return capital to shareholders. Owl Rock believes that ORI leadership should look to spin off or sell the title business. “The general insurance business alone is worth more than the value attributed to the entire company, implying that the market is ascribing a negative value to the third-largest title business in the country.” The activist also would like the management team to buy back more shares than it is currently doing. Lastly, Owl Rock would like the board to have an independent Chairman.

Gilead Sciences (Ticker: GILD)-  On April 13th, the FDA accelerated Gilead’s Trodelvy for advanced/previously treated bladder cancer. This approval adds to the product’s momentum after last week’s full clearance for use in triple-negative breast cancer. As mentioned in the Gilead brief released a couple of weeks ago, Gilead acquired Immunomedics for $21 billion to bring in Trodelvy as a critical component of a revitalized cancer pipeline. The expansion for further uses only helps increase the possible revenue brought into Gilead. 

Verizon Communications (Ticker: VZ)- The telecom giant reported top and bottom beats for the 1st quarter of 2021. Earnings (bottom line) of $1.31 per share was better than the S&P Capital IQ Consensus of $1.28, while revenues (topline) rose 4.0% year/year to $32.87 billion vs. the $32.47 billion S&P Capital IQ Consensus. Even with all the money spent on C-Band/5G infrastructure, leaders reaffirmed their positive 2021 financial guidance. During the 1st quarter earnings call, management stated they believe the company will have an excellent 2nd quarter. AT&T and T-Mobile have been running free-phone promotions to keep and add customers; Verizon has been more measured in its offers. Subscriber growth can measure the difference in the phone promotions, where Verizon has lagged behind the pack. Verizon continues to see partnerships like and Corning as the best path to bring advanced 5G services from development to actual sales.

The markets enjoyed the Spring months as the “Great Reopening” has begun. We continue to look past this period to see what awaits needs to the end of the calendar year. As we enter the Summer months, the market will start to look past this euphoric return to normalcy to see where the economy and fiscal/monetary policy lie. While the economy will be in better shape, we have concerns that policy decisions that have propped up the stock market will be less favorable. The market in kind could find trouble, say if the Federal Reserve starts to taper on their historically very loose monetary policy. As always, we appreciate your trust and look forward to a great Summer.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Graham Capital Wealth Management, LLC (“Graham”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Graham and its representatives are properly licensed or exempt from licensure.