Market Recap: February 2021
As we enter the spring and summer seasons and hopefully get back to some form of normalcy, risks will certainly remain as we navigate a post-pandemic “new normal”. For those affected by the recent Winter storms, you are in our thoughts and prayers.
Brief Market Recap
While trading frenzies and short selling in equities dominated headlines in January, the bond market, specifically the U.S. Treasury market, stepped into the spotlight in February. Optimism around more stimulus coupled with economic reopening supported higher inflation expectations, which put upward pressure on Treasury yields.
Equity markets also rallied on more promising vaccine news. International developed and emerging markets also generated positive returns in February, but modestly below the U.S. market. Small cap and value stocks were standout performers across global equity markets. Those segments were hardest hit during the initial stages of the pandemic but have come back into favor as the prospects for those companies improve with more reopening measures and widescale vaccine distribution. Higher inflation expectations continued to benefit the prices of most commodities, notably energy and industrial metals. The mid-February extreme cold weather in Texas caused some disruption in oil production, which further supported energy prices.
Consumer Strength
Investors will be keenly focused on consumer behavior and how fiscal stimulus and the easing of restrictions plays out in consumer spending data. Consumer spending accounts for more than two-thirds of U.S. GDP and thus will be a key component of the economic recovery. The latest retail sales report released in mid-February showed a 5.3% month-over-month jump in sales in January 2021. This far exceeded the forecast of 1.1%, perhaps indicating that stimulus checks are being spent and supporting the real economy.
With more fiscal stimulus on the horizon and additional vaccination progress, the National Retail Federation, the world’s largest retail trading association, is forecasting potentially record-breaking year-over-year retail sales growth in 2021. If that projection is accurate, it would likely accelerate the economic recovery.
Please let us know what else we can do to serve you. We are here for you and happy to just chat about what is going on in your world. We look forward to continuing to help all of our clients plan for and achieve their financial objectives.
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