Monthly Market Insights | April 2021
Improved economic conditions and broadened vaccine programs ignited a broad stock market rally, though rising treasury yields dragged on technology and high-growth stocks.
The Dow Jones Industrial Average led, picking up 6.62 percent. The Standard & Poor’s 500 Index rose 4.24 percent while the tech-heavy Nasdaq Composite added 0.41 percent.1
Bonds Take Center Stage
The month began strong, thanks to a retreat in Treasury bond yields, solid economic reports, and the approval of another vaccine.
However, enthusiasm faded when yields climbed higher following Federal Reserve Chair Jerome Powell’s belief that inflationary pressures will be felt in the future. When yields leveled off, stocks resumed their advance, aided by the signing of the $1.9 trillion stimulus bill into law and another round of upbeat economic reports.2
Rotation to Cyclicals
Technology stocks and high-growth stocks played a limited role in the March rally as investors rotated their portfolios into other sectors, including cyclical names. The Nasdaq Composite early in the month flirted with a correction, defined as a 10 percent or greater pullback from a recent high.
Traders eagerly awaited the two-day Federal Open Market Committee meeting, which ended on March 17. The Fed affirmed its monetary policy, which helped push the Dow Industrials and S&P 500 to record closing highs. Nevertheless, characteristic of the month’s trading, markets reversed themselves the next day as a pickup in Treasury yields sent technology and other high-growth stocks lower once again.3
Despite the choppiness of the closing days of trading, stocks ended on a strong note to cap an otherwise good month for investors.
Every industry sector ended higher in March, with gains in Communication Services (+2.04 percent), Consumer Discretionary (+3.49 percent), Consumer Staples (+8.26 percent), Energy (+2.60 percent), Financials (+6.19 percent), Health Care (+3.46 percent), Industrials (+9.01 percent), Materials (+7.67 percent), Real Estate (+6.19 percent), Technology (+0.03 percent), and Utilities (+8.93 percent).4
What Investors May Be Talking About in April
A new earnings season is fast approaching, and investors will be poring over financial statements to gauge business prospects.
Thanks to the fiscal stimulus, vaccinations, and more reopenings, many economists believe that growth will accelerate at the macro level. Economic reports, such as retail sales and industrial production, will help economists measure the momentum.
However, inflation numbers will continue to be closely scrutinized. Any pickup could rattle investor confidence in the Fed’s policy to keep the short-term rates near zero—a central pillar supporting the financial markets (see “The Fed” section below).
Overseas markets posted solid returns in March, as improving sentiment regarding an economic recovery outweighed further lockdowns in Europe. For the month, the MSCI-EAFE Index rose 2.18 percent.5
The major European markets ended higher. Germany led, picking up 8.86 percent. France rose 6.38 percent, and the UK tacked on 3.55 percent.6
The returns on Pacific Rim stocks were mixed. Australia gained 1.76 percent and Japan added 0.73 percent, but Hang Seng slipped 2.08 percent.7
Gross Domestic Product (GDP)
The final read for the fourth quarter GDP growth was 4.3 percent, up from the previous estimate of 4.1 percent.8
Led by an acceleration in hiring by the leisure and hospitality industry, employers added 379,000 new jobs in February. This beat consensus forecasts by a wide margin and lowered the unemployment rate to 6.2 percent.9
Retail sales fell by 3.0 percent in February, hampered by the month’s severe winter weather. January retail sales figures were revised upward, from 5.3 percent to 7.6 percent.10
Industrial output declined 2.2 percent. Industrial production was dragged lower by a drop in manufacturing production, which was impacted by February’s inclement weather.11
Housing starts dropped an unexpected 10.3 percent, as severe weather and labor constraints affected activity.12
Existing home sales declined 6.6 percent amid a tightening supply of homes on the market. Despite the drop from January levels, sales in February exceeded those in the same period in 2020 by 9.1 percent.13
Sales of new homes fell 18.2 percent, owing to inclement weather and a tight supply.14
Consumer Price Index
Prices of consumer goods rose by 0.4 percent in February, as gasoline prices jumped 6.4 percent. Core inflation, which excludes the more volatile food and energy sectors, was up 0.1 percent last month.15
Durable Goods Orders
Durable goods orders fell 1.1 percent, the first decline in 10 months.16
The message coming out of the March Federal Open Market Committee (FOMC) meeting remained consistent: The Fed would maintain its near-zero interest rate policy and monthly bond purchasing program.
Fed officials stated that they expect some pickup in inflation this year but price increases would be transitory. They also said any changes to monetary policy would be communicated well in advance of a policy change.17
"Overall inflation remains below our 2 percent longer-run objective,” Fed Chair Jerome Powell said in prepared remarks. “Over the next few months, 12-month measures of inflation will move up as the very low readings from March and April of last year fall out of the calculation."
"Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term," he continued.
"However, these one-time increases in prices are likely to have only transient effects on inflation. The median inflation projection of FOMC participants is 2.4 percent this year and declines to 2 percent next year before moving back up by the end of 2023."18
By the Numbers: Jazz Appreciation Month (JAM)
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.
Please consult your financial professional for additional information.
Copyright 2021 FMG Suite.
1. The Wall Street Journal, March 31, 2021
2. CNBC.com, March 11, 2021
3. FederalReserve.gov, March 17, 2021
4. FactSet Research, March 31, 2021
5. MSCI.com, March 31, 2021
6. MSCI.com, March 31, 2021
7. MSCI.com, March 31, 2021
8. CNBC.com, March 25, 2021
9. The Wall Street Journal, March 5, 2021
10. The Wall Street Journal, March 16, 2021
11. Bloomberg.com, March 16, 2021
12. CNBC.com, March 17, 2021
13. CNBC.com, March 22, 2021
14. APnews.com, March 23, 2021
15. The Wall Street Journal, March 10, 2021
16. The Wall Street Journal, March 24, 2021
17. Reuters.com, March 17, 2021
18. FederalReserve.gov, March 17, 2021
19. WBGO.org, March 2021
20. Jazz.fm, January 29, 2020
21. BBC.co.uk, April 13, 2020
22. Brittanica.com, October 9, 2020
23. TheBalance.com, April 13, 2020