We hope that you and your family are enjoying the spring weather and warmer temperatures. Although the weather is improving, the pandemic has brought an increase in the daily number of worldwide infections of Covid-19 (325k at the start of the month to about 630k as of this writing). The third wave of Covid-19 has once again led to restriction. Nevertheless, given that the vaccine distribution increased, the stock market trading continued to align with the expectations of an economic recovery. The sectors that benefitted from ‘stay-at-home’ mode of economy traded lower relative to sectors that benefit from ‘return-to-normal’ mode of economy. Below we highlight a few noteworthy developments over the last month.
Macroeconomic and market developments
In March, the S&P 500 index continued to look for direction as a rise in bond yields was supported by expectations of high inflation which, in turn, helped the financial sector while dragging the technology sector.
Driven by the cyclical energy and financials sectors, the S&P/TSX continued its advance. NYMEX WTI Crude Oil prices witnessed tumultuous trading as prices jumped from ~USD 60 per barrel at the start of the month to ~USD 66 per barrel in the mid of the month and back to USD 61 per barrel as of this writing.
The Federal Chairman, Jerome Powell, reemphasized that the Feds will hold interest rates at their current level until at least 2023 even as policymakers raised the GDP growth forecasts to 6.5% from 4.2% and inflation forecast to 2.4% from 1.8% for the year 2021.
Expectations of higher inflation led to a continued rise in bond yields that weighed on fixed income assets during the month.
The Federal Chairman Jerome Powell continued to downplay the risk of high inflation as forecasts indicate inflation will fall back to 2% in 2022.
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