We hope that you and your family are well and enjoying this spring weather. Over the past month, the pandemic continued to worsen across the globe even as the pace of vaccine administration accelerated. The number of daily new infections increased from about 650k per day at the beginning of April to about 850k as of this writing. In comparison to the developed countries, the emerging markets have lagged in vaccine distribution and the latest Covid wave has hit them hard.
In the financial markets, year-to-date, the cyclical recovery theme was evident in the outperformance of Energy and Financials sector. As the ‘return-to-normal’ theme got overextended in the short term, the last month witnessed a relative comeback from the Information Technology and Consumer Discretionary sectors. Below we mention a few noteworthy developments over the last month.
Macroeconomic and market developments
In April, the S&P 500 Index advanced underpinned by a recovery in Information Technology and Consumer Discretionary sectors as the Energy Sector, the flagbearer of the recovery trade so far, took a breather.
The story on this side of the border was similar except that the heavyweight materials sector also saw an increase on the back of gold prices that advanced by ~4.1% from the beginning of April to as of this writing.
The Bank of Canada announced that it is keeping benchmark interest rate low at 0.25%. They did announce, however, that there is a possibility of its inflation target being hit during the second half of 2022 rather than 2023 as previously expected. This could indicate that the interest rate increase in Canada could come earlier than 2023.
Stimulus checks, progress in vaccine administration, and the reopening of the US economy led to a sharp increase in consumer confidence. An index measuring the US Consumer confidence advanced sharply in April to 121.7 from 109.0 in March. In February 2020, this index was at 132.6 before the pandemic caused it to drop.
US Federal Reserve alleviated bond market concerns by reiterating it is not considering slowing the pace of bond purchases anytime soon and the recent increase in the inflation looks transitory.
How does this affect my investments?
The stock markets are inherently volatile and short-term market movements are impossible to predict. Historically, market declines have been followed by recoveries and new highs. By staying invested in a diversified portfolio, your portfolio will be well positioned to benefit from a recovery while mitigating the volatility experienced during the period.
If you have any questions about your investment portfolio, your advisor at O’Farrell Wealth and Estate Planning would be happy to discuss them with you.
O’Farrell Wealth and Estate Planning