Hero Pane Image

Investment Update

Updated May 7, 2021

Our investment team remains committed to sharing regular updates and market insights to keep you informed. Please look for our next update on May 21.

Disappointing Employment Data

 The U.S. economy added 266,000 jobs in April; economists had expected a gain of 975,000. March’s jobs number was revised downward as well, from 916,000 to 770,000. The unemployment rate increased in April from 6 percent to 6.1 percent as more individuals joined the labor market. This marks one year since arguably the worst employment report in U.S. history, when more than 20 million jobs were lost and the unemployment rate spiked to 14.8 percent. Last April marked the peak of the COVID-19 lockdowns.

First-Quarter Company Earnings Surge

Last week was the biggest week for first-quarter company earnings reports and they did not disappoint. Apple led the way, reporting quarterly revenues of $89.6 billion and earnings per share (EPS) of $1.40. These results blew past analyst estimates of $77 billion in revenue and EPS of $0.99. Companies from across the spectrum have announced strong results. Diverse firms such as Facebook, General Motors, McDonald’s and Caterpillar all exceeded analyst expectations. Total S&P earnings for the quarter on an annualized basis are likely to top $195 per share. This would be up approximately 40 percent from last year.

Strong First-Quarter GDP

First-quarter GDP for 2021 increased 6.4 percent and marked the second fastest pace for growth since the second quarter of 2003. Widespread vaccinations and government monetary and fiscal stimulus propelled a surge in consumer spending, which makes up 68 percent of U.S. GDP. Consumer spending was up 10.7 percent for the quarter. Spending on durable goods, such as appliances and other long-lasting purchases, was up a remarkable 41.4 percent.

Personal income was up 21.1 percent in March driven by additional stimulus checks and increased employment. While the U.S. consumer is spending, they are also saving much of the increased income. The savings rate for the first quarter was 21 percent — way above the pre-pandemic average of approximately 8 percent. The additional savings are likely to fuel more spending in coming quarters as the savings rate likely declines to more normal levels.

Mixed Equity Markets

Equity markets have been mixed recently. Investors have been weighing robust earnings and strong economic data against high valuations and inflation concerns. While the S&P 500 and Dow Jones Industrial Average are near all-time highs, they have been moving sideways. On the other hand, the tech-heavy NASDAQ is down more than 3 percent from its recent high, including a sharp 261 point drop on Tuesday. Markets had a strong start to the year and we expect continued positive tailwinds from the economy and earnings. However, predictions of higher inflation and proposals to significantly increase corporate and investment-related taxes are weighing on the minds of investors.

Bond Yields Remain Range Bound

Since surging in the first quarter, intermediate and long-term interest rates have remained in a narrow range for the last several weeks. It is typical for interest rate markets to moderate for a period of time following periods of increased volatility. We continue to believe intermediate and long-term rates will trend higher throughout the year, given the fading of the pandemic, strengthening economy and unprecedented economic stimulus.

Since surging in the first quarter, intermediate and long-term interest rates have remained in a narrow range for the last several weeks. It is typical for interest rate markets to moderate for a period of time following periods of increased volatility. We continue to believe intermediate and long-term rates will trend higher throughout the year, given the fading of the pandemic, strengthening economy and unprecedented economic stimulus.

What Should I Be Doing With My Investments?

We encourage you to pay attention to the latest developments, but not to lose sight of your long-term investment strategy. Reach out to our investment team to discuss your options and reaffirm your timeline and goals. Call our investment team at (518) 415-4401.