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May 5, 2021

April market review

Dear Clients and Friends of the Firm:

The markets continue their upward trend, supported by accommodative fiscal policy from the Federal Reserve, strong gross domestic product (GDP) numbers and solid earnings reports.

As President Biden celebrated his 100th day in office to close the month, the traditional favorable equity market performance during the so-called “honeymoon” phase continued, with the S&P 500 rallying about 10% over that time frame. The S&P 500 ended April up 5.24%, its third consecutive positive monthly gain. The Dow Jones and NASDAQ reached new highs as well.

Driving the equity market higher is the rapid distribution of over 235 million vaccines, the best economic growth (+6.4% annualized) since 2003, and a dramatic, better-than-expected surge in corporate earnings – the highest (+36%) since 2010, explains Raymond James Chief Investment Officer Larry Adam. As the presidential “honeymoon” period ends, debates over government spending, taxes, inflation, and Fed tapering are likely to lead to increased volatility.

The advance estimate of first quarter GDP came in at a 6.4% annual rate, but Raymond James Chief Economist Scott Brown notes that the headline figure understates the economy’s strength. Consumer spending on durable goods rose sharply, fueled by stimulus checks, and spending on services should pick up as the economy reopens.

In Washington, infrastructure and tax proposals remain just that – proposals. Congress is drafting legislation, and Raymond James Washington Policy Analyst Ed Mills expects to see broad compromise in order to secure the necessary votes. Generally speaking, Mills believes we can expect a significant amount of additional federal spending later this year tied to revenue-raising measures. The compromises necessary for passage may create a near-term Goldilocks scenario for the market in terms of further economic stimulus.

Let’s review where we are so far this year:

 

 

 

 

 

 

 

 

 

Yield, interest rates and inflation

With interest rates remaining low despite positive economic reports, demand for yield is rising across all bond maturities. Investors are keeping a wary eye on inflation, as are the members of the Federal Open Market Committee. Long-term inflation expectations, which have remained close to the Federal Reserve’s 2% long-term goal, are key. Should those long-term inflation expectations rise significantly, then actual inflation would trend higher, Brown notes. However, the Federal Reserve, which wants inflation to be moderately higher in the near term, has the tools to bring inflation back down. Fed Chair Powell has signaled that monetary policy will remain accommodative until employment and inflation are closer to the central bank’s goals.

Overseas

Once again, U.K. and European markets generated modest gains for the month, lifted by positive earnings reports and optimism for economic recovery as more and more vaccines get distributed. However, in Asia, market performance was decidedly mixed. Singapore and Hong Kong made plans to broaden travel opportunities; on the other hand, Japan (host of the Summer Olympics) implemented its first-ever lockdowns, and India’s COVID-19 cases rose to record levels, prompting large-scale economic disruption.

The bottom line

The vast majority of S&P 500 companies have surprised on the upside, beating their estimates by an average of 23.7%. Even with a relatively bullish outlook for domestic stocks, investors should expect normal pullbacks on occasion. Those ready to put cash to use can plan to use any weakness as an opportunity to strategically add positions at an individual stock and sector level. Lastly, remember to file your taxes before the extended deadline of May 17.

As always, we wish you and yours well. Thank you for your confidence in us. We’ll be sure to keep our eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

On a Personal and Fun Note - She’s a role model and a super hero. She’s Mom.

Did you know that in the United States alone, around 122 million phone calls are made to moms on Mother’s Day? It’s not hard to understand why. Near or far, our moms have seen us through our happiest and saddest, smelliest and grumpiest of times. Through terrible twos, school plays, learners permits, graduations and first jobs. As our first teacher, protector, role model and friend, it seems only fitting that we set aside a day in their honor to share our love and gratitude in return.

This Mother’s Day – Sunday, May 9 – we hope you’re able to set aside some time to celebrate the mothers in your life. Whether with a phone call, a card, flowers or a shared meal, there’s no better time to remind them how much they mean to us. For those of us who can’t be with our mom, this day is a great time to share fond memories with loved ones or do an activity she would have enjoyed. 

However you choose to mark this Mother’s Day, we hope it’s a special one for your family and you.

And if you’re a mother yourself, we hope your day is filled with love and leaves you feeling deeply appreciated for all that you do.

Later in the month, on May 31, the financial markets and our office will be closed to observe Memorial Day in honor of the people who sacrificed their lives while serving in the United States Armed Forces. Should you find it necessary, you can access your accounts using Raymond James Investor Access any time. We’ll reopen the next day.

Sincerely,

Tricia

Tricia L. Tripp, CPA, CFP®
Financial Advisor

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment Advisory Services are offered through Tripp Financial Consultants, Inc. Tripp Financial Consultants, Inc.is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc.

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges which would reduce an investor’s returns. Small cap securities generally involve greater risks. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.

Material prepared by Raymond James for use by its advisors.