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ECRI’s Lakshman Achuthan turns sour on US economy, growth

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One of Wall Street’s veteran economic forecasters is toning down his economic growth forecast.

The Economic Cycle Research Institute’s Lakshman Achuthan told CNBC his leading indicators are pointing to a slowdown that’s picking up momentum — highlighting one particular trend in the latest unemployment rate chart that supports his case.

“What really caught our eye, is that unemployment rate — where it’s just flat-lined since October,” the firm’s chief operations officer said Friday on CNBC’s “Trading Nation.”

He contended it doesn’t fit within the narrative of the United States’ strong growth story.

His thoughts came as the Dow Jones Industrial Average was in the process of closing in correction territory — around 10 percent off its all-time high. He believes Wall Street is finally starting to realize the economy is not as strong anymore.

Achuthan isn’t the only one. Guggenheim’s head of investing sees a tough road ahead for the market and economy, with a sharp recession and a 40 percent decline in stocks looming.

Scott Minerd, who warned clients in a recent note that the market is on a “collision course with disaster,” told CNBC on Friday he expects the worst of the damage to start in late 2019 and into 2020. Along with the decline in equities, a rise in corporate bond defaults is likely as the Federal Reserve raises interest rates and companies struggle to pay off record debt levels.

“When we look at what may be the backdrop for all the jitters that are going on, we would point to a good old fashioned slowdown in the economy that is coming onto people’s radar just around now,” Achuthan said.

But don’t mistake Achuthan for being permanently bearish. He was a self-proclaimed “super bull” following the 2016 presidential election, as recession chatter was heating up.

“Last fall, the same leading indicators that anticipated the synchronized global growth that we all enjoyed last year in 2017, they turned over,” he added.

He isn’t calling for the economy to tank anytime soon. But with every passing month without a pickup in growth, Achuthan warns the economy will be less equipped to deal with a negative shock such as a potential trade war. So, he’s urging stock market investors to be vigilant.

Achuthan recommended retail investors should consider buying the 10-Year Treasuries the next time yields reach 3 percent, as leverage against downturn risks.

–CNBC’s Jeff Cox contributed to this article.

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More earnings, April’s big jobs report and inflation worries could swing markets in the week ahead

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Traders on the floor of the New York Stock Exchange.

Source: NYSE

April’s jobs report and a barrage of earnings news make for another busy week for markets, as the calendar rolls into May.

Stocks notched solid gains in April, as REITs, consumer discretionary names and communications services companies outpaced the broader market, all more than 7% higher. However, April finished on a sour note, with stocks selling off on Friday.

“Since November, there’s been a 30% rally,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office. He noted that historically the November to April period is historically the strongest for stocks. “There’s the adage ‘sell in May, go away.’ It may be somewhat appropriate this year since we’ve done so well in the last six months.”

Big jobs report

April’s employment report is released Friday, and the market is expecting a big number.

Economists say payrolls in April could easily reach 1 million, after 916,000 jobs were added in March. Estimates range from about 700,000 to a forecast of 2.1 million from Jefferies economists.

According to Dow Jones, there is a consensus forecast of 978,000 among the economists it surveyed and the unemployment rate is expected to fall to 5.8% form 6%.

Fed speakers will also be important after Fed Chairman Jerome Powell said in the past week that the Fed is still looking for “substantial further progress” in its goals for the economy.

The chairman emphasized that the Fed is not close to tapering back its bond buying program, a surprise to some investors. Some bond market pros had expected the Fed to start discussing cutting back purchases at its June meeting and begin to reduce its $120 billion monthly bond buying by the end of the year or early next year.

“Next week is all about the jobs number, because as part of the Fed’s path to ‘substantial progress’ on their two roles, we’ll see how much further along that path they are next Friday” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. The Fed’s mandate is to pursue full employment and a steady pace of Inflation, which it has targeted at 2%.

The Fed has expected a temporary period of high inflation which it expects to see subside later in the year though Boockvar and others say inflation could be hotter than the Fed expects. The core personal consumption expenditures price index jumped 0.36% in March, with the year-ago rate rising from 1.4% to 1.8%. It is expected to go even higher in April. Headline inflation in the consumer price index is expected to begin running at 3% or better when it is reported May 12.

Just days after Powell’s comments on tapering, Dallas Fed President Rob Kaplan Friday said the Fed should begin the discussion on paring back bond purchases because imbalances in financial markets and the economy is improving faster than expected.

The market’s focus on the Fed’s bond program makes the jobs report even more important. If the Fed starts to taper back those asset purchases, it would then signal it would be on the path toward raising interest rates. Most economists do not expect the Fed to raise interest rates before 2023.

“If this jobs number comes in super hot, it’s going to make people up their estimate on when the Fed might taper,” said Michael Schumacher, director rates at Wells Fargo.

Powell is among Fed speakers in the coming week, but he is not expected to provide any new views when he participates in a National Community Reinvestment Coalition conference Monday afternoon. Kaplan speaks Thursday, and New York Fed President John Williams and Cleveland Fed President Loretta Mester are also among Fed officials speaking in the coming week.

Earnings soar

So far, a record 87% of S&P 500 companies have beat earnings estimates, and earnings look to be growing by more than 46%, according to Refinitiv.

Credit Suisse chief U.S. equity strategist Jonathan Golub upped his forecast Friday for the S&P 500 based on strong earnings. “We are raising our 2021 S&P 500 price target to 4600 from 4300, representing 9.2% upside from current levels, and 22.5% for the year.

Earnings are expected from a diverse group of companies, from General Motors to ViacomCBS. Pharma will be in the spotlight as vaccine makers Pfizer and Moderna both report. Draftkings and Beyond Meat are also on the schedule.

A host of travel related companies issue results, including Booking Holdings, Hilton Worldwide , Marriott Vacations, and Caesars Entertainment. Consumer brands, like Anheuser Busch Inbev and Estee Lauder also report, as do insurers including AIG, Allstate, and MetLife. (A calendar with some key earnings dates appears below.)

Chang said the market has discounted a lot of the positive news already.

“In spite of the really strong reports from the bellwether companies, you’re seeing some of the names starting to peter out a little bit,” said Chang. “I think it’s a sign that so much good news is discounted. I suspect the market is due for a breather. I think in the next couple of months, we’re likely to see sideways movement. There’s likely to be a pullback which will be healthy.”

Chang said he expects some of the “boring” blue chips that haven’t participated as much in the rally to do better. Some of those names can be found in pharma, he said.

Heading into the coming week, investors will be watching for words of wisdom from Warren Buffett at Berkshire Hathaway’s annual meeting Saturday.

Week ahead calendar

Monday

Monthly vehicle sales

Earnings: Avis Budget, Loews, Alexion Pharmaceuticals, Rambus, Leggett and Platt, Vornado, American Water, Iamgold, Mosaic, Apollo Global Management, ZoomInfo, Estee Lauder, ON Semiconductor

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending

2:00 p.m. Senior loan officer survey

2:10 p.m. New York Fed President John Williams

2:20 p.m. Fed Chairman Jerome Powell at National Community Reinvestment Coalition conference

Tuesday

Earnings: Pfizer, CVS Health, ConocoPhillips, Martin Marietta Materials, Activision Blizzard, DuPont, KKR, T-Mobile, Akamai, Pioneer Natural Resources, Lattice Semiconductor, Denny’s, Hyatt Hotels, Host Hotels, PerkinElmer, Prudential Financial, Viavi, Caesars Entertainment, Thomson Reuters, Cummins, Vulcan Materials

8:30 a.m. International trade

10:00 a.m. Factory orders

Wednesday

Earnings: General Motors, Hilton Worldwide, Booking Holdings, Fox Corp, Uber Technologies, Etsy, PayPal, Allstate, Accolade, Cognizant Technology, MetLife, Marriott Vacations, CF Industries, Marathon Oil, CyberArk Software, Emerson Electric, Amerisourcebergen, BorgWarner, Zynga, Tanger Factory Outlet, Twilio

8:15 a.m. ADP employment

9:30 a.m. Chicago Fed President Charles Evans

9:45 a.m. Services PMI

10:00 a.m. ISM services

11:00 a.m. Boston Fed President Eric Rosengren

12:00 p.m. Cleveland Fed President Loretta Mester

Thursday

Earnings: Regeneron, ViacomCBS, Kellogg, Moderna, Murphy Oil, Beyond Meat, Shake Shack, Square, Roku, Axon, Cushman and Wakefield, Tapestry, Neilsen, AIG, Anheuser-Busch, EOG Resources, Consolidated Edison, DropBox, Expedia, Roku, Peloton Interactive, Datadog, Cardinal Health, Ambac Financial

8:30 a.m. Initial jobless claims

8:30 a.m. Productivity and costs

9:00 a.m. New York Fed’s John Williams

10:00 a.m. Dallas Fed President Rob Kaplan

1:00 p.m. Cleveland Fed President Loretta Mester

Friday

Earnings: Cigna, Siemens, Gannett, AMC Networks, Draftkings, Liberty Broadband, Elanco Animal Health

8:30 a.m. Employment

10:00 a.m. Wholesale trade

3:00 p.m. Consumer credit

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U.S. to restrict travel from India effective May 4 amid massive Covid surge

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People wearing personal protective equipment (PPE) carry the body of a person who died from the coronavirus disease (COVID-19), during a mass cremation, at a crematorium in New Delhi, India April 26, 2021.

Adnan Abidi | Reuters

The Biden administration will restrict travel from India as that country grapples with a gigantic surge in coronavirus cases, White House press secretary Jen Psaki said Friday.

The policy will take effect Tuesday, May 4, Psaki said in a statement. The administration made the decision on the advice of the Centers for Disease Control and Prevention, Psaki said.

The State Department declined to comment on the reported travel restrictions, referring a reporter’s question to the White House.

While Covid infections and deaths have been on the decline in the U.S. as millions of Americans get vaccinated each day, India is in the grip of an unprecedented surge in cases.

India reported a record daily death toll from Covid on Wednesday. The country has reported more than 300,000 new cases each day for more than a week.

This is breaking news. Please check back for updates.

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There’s no hotter area on Wall Street than ESG with sustainability-focused funds nearing $2 trillion

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Sustainability-focused funds attracted record inflows during the first quarter, pushing global assets under management in ESG funds to nearly $2 trillion, according to a report from Morningstar released Friday.

The rise underscores the momentum behind ESG investing, or when environmental, social and governance factors are considered. Assets in these types of funds first topped $1 trillion in the second quarter of 2020, before growing to $1.984 trillion by the end of the first quarter.

Global sustainable funds attracted a record $185.3 billion during the first quarter of 2021, up 17% quarter over quarter. Overall, assets in ESG funds jumped 17.8% compared to the fourth quarter of 2020.

“2021 began where 2020 left off with record demand for sustainable investment options across the globe,” noted Hortense Bioy, global director of sustainability research at Morningstar.

Europe accounted for over 79% of total fund flows, although other regions are allocating more and more to ESG funds.

In the U.S., sustainability-focused funds attracted nearly $21.5 billion in net inflows, a new record. The figure more than doubled year over year, up from $10.4 billion during the first quarter of 2020, and was roughly five times larger than 2019’s first quarter flows.

According to Morningstar, the five funds that attracted the most inflows in the first quarter were: iShares Global Clean Energy ETF, iShares ESG Aware MSCI USA, First Trust Nasdaq Clean Edge GreenEnergy, iShares ESG Aware MSCI EAFE and iShares ESG Aware MSCI EM.

Sustainability-focused funds that attracted most money during Q1

Fund name Ticker Q1 inflows in billions
iShares Global Clean Energy ICLN $1.98
iShares ESG Aware MSCI USA ESGU $1.33
First Trust Nasdaq Clean Edge GreenEnergy QCLN $1.00
iShares ESG Aware MSCI EAFE ESGD $0.87
iShares ESG Aware MSCI EM ESGE $0.82

ESG investing was already gaining momentum before the pandemic hit. But it’s since accelerated driven by a number of factors, including Covid’s disproportionate toll on minorities, social unrest that’s swept the U.S., as well as devastating wildfires and deadly winter storms.

“Over the past year, a broad consensus on the need to address climate risk in investment portfolios has emerged,” Morningstar said in a recent report. “More investors see the green transition to a low-carbon economy as an investment opportunity. Asset managers are therefore rapidly developing new risk-management solutions, launching innovative products, and retooling existing ones to help investors decarbonise their portfolios and invest in green solutions,” the firm added.

“ESG” is an umbrella term that can contain a host of different investing strategies, which is partly why it has faced criticism. Opponents cite a lack of transparency.

For the “E” specifically, Morningstar said there were 400 climate-aware funds at the end of 2020. The firm said these can be sub-divided into five categories: low carbon, climate conscious, green bond, climate solutions and clean energy/tech.

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