As part of our commitment to keep you informed on the current market environment, I will be sending a weekly market commentary to recap what happened in the week that just past, our expectations, and any current advice that we have.
- After dropping on Monday, stocks rallied the rest of the week and ended near or above record levels. We saw global markets (represented by the MSCI All Country World Index) up 2.6% and domestic stocks (represented by the S&P 500 Index) up 2.7%.
- After hitting correction territory on Monday, the tech-heavy NASDAQ index was up 6.3% over the following three days. This volatility has been primarily driven by uncertainty in inflation and bond yields.
- On Thursday, President Biden signed the $1.9 trillion relief bill. As early as this past weekend, Americans would begin receiving direct payments. Additionally, other features of the bill include extended unemployment benefits and funds for state and local governments.
- The U.S. Federal Reserve Board will conduct is periodic two-day meeting this upcoming week. It’s expected that they continue to keep interest rates unchanged. As we’ve seen over the last few weeks, investors will keep a close eye on their statements to gauge future expectations on rates and inflation.
- In terms of economic data, much of what was released last week was positive. Both initial weekly jobless claims and continuing claims fell last week. The University of Michigan’s report of consumer sentiment rose to a level not seen since the very beginning of the pandemic. While still well below levels of February 2020, this marks good progress in seeing U.S. consumers gain confidence in economic stability.
- Investors have a lot to consider at this point in time. U.S. stocks are near or above record levels, bond yields have moved up quite significantly, and unemployment remains an issue. We’ve seen a rotation in stock leadership this year from high-growth technology to more mature financials and industrials. Despite that rotation, the pandemic has accelerated advancement in automation, artificial intelligence, and cloud computing, which have the ability to increase our global productivity. We expect global GDP to increase sizably this year and likely to continue into 2022. It’s important to continuously take a step back from the granular level and reevaluate portfolio positioning and ensure you’re remaining diversified and tilting portfolios to take advantage of an ever-changing economic landscape.
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