Markets Mixed as Investors Weigh Reopening Optimism
- Stock markets were mixed for the week. We saw global markets (represented by the MSCI All Country World Index) up 0.3% and domestic stocks (represented by the S&P 500 Index) up 1.6%. Both U.S. small companies and emerging markets pulled back last week, down over 2% each.
- With bond yields falling for most of the week, taxable bonds ended up 0.4%. It has been initially a tough year for bonds with rising bond yields and inflation concerns, driving the Barclays U.S. Aggregate Bond index down -3.3% on a year-to-date basis.
- As one would expect, oil prices rose above $60 per barrel in the second part of the week due to the closure of the Suez Canal. Global supply chains have already been stressed and this incident will likely cause further issues in certain industries. It’s estimated that 12% of global trade passes through this canal.
- February inflation data was released last week and showed figures still well below the Federal Reserve target. The core inflation index rose 1.4% year over year in February (excluding food and energy prices). The Federal Reserve targets a 2% inflation figure. Thankfully, we’re still not close to an overheating economy.
- The jobless claims reported last week were for 684,000 individuals. This is the first report below 700,000 people since the pandemic began.
- Sticking with the theme “one year since the market bottom,” I wanted to focus attention on unemployment. Since the pandemic started, unemployment has dropped from 14.8% down to 6.2%, reflecting a reduction of 8.6%. What’s been unusual is the decline’s pace. For example, after the Great Recession in 2009, it took over a decade for U.S. unemployment to drop from 10% in October 2009 to 3.5% in February 2020. This just speaks to the type of recession we saw last year, which was driven by a specific event rather than a fundamental economic issue.
- I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
Mike Horwath, CFA
Chief Investment Officer