If you are like most investors, you would like perspective on how financial market trends may affect your portfolio of investments. For user-friendly commentary, please enjoy the quick read and chart following. As always, our Entrust advisors welcome the opportunity for a conversation.
Entrust Financial LLC® Market Commentary for the First Quarter, 2021
Following a record-breaking year, capital markets continued their rally through the first quarter of 2021. Factors such as increased vaccine distribution combined with additional government stimulus measures boosted consumer confidence in the U.S. to its highest levels since the pandemic began.
A massive $1.9 trillion of fiscal stimulus was approved by the U.S. government in March, to build on the historic measures already taken to bolster the economy in response to the global pandemic. Traditionally governments step in with fiscal stimulus measures when economic indicators are trending downwards. Interestingly, the current stimulus package is being rolled out while economic indicators and private sector demand are improving. This timing signals a strong commitment by the current administration to not only support, but accelerate, the pace of economic recovery in the U.S.
The rally in the capital markets resulted in dramatic global investment in equity funds. In fact, total investment over the last 6 months exceeded that of the prior decade. One notable aspect of the current enthusiasm for stocks is a shift towards value-oriented companies; it remains to be seen whether this trend will continue through the rest of 2021. If it does, this will mark the first year that value stocks will outperform their growth peers since 2007.
Highlights from the first quarter include:
- President Joe Biden signed a $1.9 trillion relief package, to provide a third round of direct payments to Americans, to extend unemployment insurance and with notable expansion of the child tax credit.
- U.S. equities continued to soar, bolstered by accelerating COVID-19 vaccine rollouts and the additional stimulus measures.
- Growth stocks underperformed value stocks for the second consecutive quarter. Several mega-cap tech companies like Apple, Amazon and Tesla experienced share price declines while rising interest rates helped fuel value stocks.
- Energy stocks soared 31%, marking an almost complete recovery from their decline in early 2020. Shares of Exxon Mobil led the sector, rising 38%.
- Bond market demand dipped, primarily due to the expectation that stimulus measures and vaccines would lead to continued rapid growth for stocks.
For those needing reassurance during these extraordinary times, the graphic below illustrates how global capital markets have rebounded following public health crises in the past.
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