Monthly Market UpdateSubmitted by Texas Legacy Wealth Management on April 1st, 2021
The market had a good start to 2021 with the S&P 500 up almost 6% for the quarter, after rallying about 4% in March. March 23rd marked a full-year from the bottom of last year’s bear market. The future seemed bleak as stocks dropped over 30% amidst uncertainty around COVID-19. Since that time, stocks have done what may have felt unthinkable at that moment – they have rallied over 70% as measured by the S&P 500 (YCharts).
After a market rally of this magnitude the question becomes: is the current market rally sustainable? History tells us that there is no reason to fear the second year of a new bull market. Per LPL Financial, there have been six other bear-market declines of at least 30% and after a strong first year stocks were also up the second year of a new bull market, averaging 16.9%.
While history is a good guide, we need to look beyond the historical data. There were a number of important developments during March that we feel provide reason to be optimistic:
- The Fed: The Fed’s meeting in March provided no major surprises with Fed Chair Jay Powell continuing to strike a highly accommodative tone as the Fed sees an improving economy yet has no plans to hike rates in the next year or two.
- Stimulus: President Biden signed into law a $1.9 Trillion COVID-19 stimulus bill which included direct checks, jobless aid, money for schools and vaccine distribution. This fiscal stimulus is likely to provide a tailwind for the economy throughout this year.
- COVID-19: vaccinations continue to increase across the US while case numbers and hospitalizations have significantly dropped over the last few months. This has the potential to lead to a continued pickup in business activity.
While our outlook continues to be positive, we would not be surprised to see some volatility throughout the year as pullbacks are common during the second year of a bull market. (LPL Financial) We will continue to watch the market and economy closely and be ready to make adjustments to portfolios as needed.
Your team at TLWM
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