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Market Recap: March 2021 Thumbnail

Market Recap: March 2021

March was another strong month for risk assets, particularly in the U.S. as vaccine manufacturing and distribution ramped up. Loosening COVID restrictions coupled with the new $1.9 trillion stimulus bill supported increased business activity and rising inflation expectations.

Brief Market Recap

Global Equities ended the first quarter with strong returns in March, led by sectors more sensitive to economic growth (i.e., industrials, materials, consumer discretionary). Private sector business activity was strong, led by service providers, however, manufacturing input costs for March recorded its second highest reading on record despite production reportedly held back by supply shortages. Accommodative monetary policy took a backseat on March 11th when President Biden signed the American Rescue Plan Act (ARPA), a $1.9 trillion stimulus program aimed at supporting households and businesses during the transition toward more normal economic activity. 

While an uneven global economic recovery caused some supply chain disruptions, continued government stimulus reinforced further improvement and a generally optimistic tone. The Federal Reserve lifted its core PCE inflation estimate 0.4 percent to 2.2 percent during the first quarter. In our view, a backdrop of steadily rising official inflation data alongside economic growth should be supportive of risk assets.

Economic Growth Accelerated in March

U.S. business activity registered a substantial increase at the end of the first quarter. A rise in new orders contributed to the acceleration amid stronger demand and looser COVID-19 restrictions in some states. Manufacturing output remained strong but was limited by raw material shortages caused by the supply chain disruptions. 

However, the U.S. manufacturing sector registered the sharpest upturn in new business in almost seven years. The confluence of inventory restocking on a global scale amid an ongoing recovery in global supply chains spurred the sharpest increase of input costs in nearly a decade. As mobility increases and personal consumption normalizes, economic growth and modest inflationary pressures should benefit global equities and real assets.

Market Outlook

Positive vaccine developments and faster distribution were a tailwind for risk markets through the first quarter, particularly in the U.S. Those efforts remain a key focus as investors evaluate how further reopening measures will impact certain regions, industries and support more global growth. Despite the optimism and encouraging economic reports, we expect fiscal and monetary policy to remain accommodative in the near-term. The rebound from the March 2020 lows was nothing short of remarkable, but as the Federal Reserve reiterated at the last FOMC meeting, the road to full recovery is a long one. Healthier labor market conditions and higher business activity should benefit risk assets as we head into the spring. We are generally positive about the economic picture, but elevated equity valuations, historically low interest rates and tight spreads warrant some caution and remind us to maintain a diversified portfolio.

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US Capital Wealth Advisors, LLC (“USCWA”) is a Texas-based investment advisory firm registered with the United States Securities and Exchange Commission (“SEC”). As an independent, fee-only, registered investment advisor (RIA), USCWA is able to provide sophisticated, holistic wealth management services, with expanded access to investment solutions. We take our fiduciary responsibility to you seriously, which means we are committed to what is in your best interest. Our long-standing objective is to enable you to achieve your financial goals and to act as a trusted resource for you and your family. 

This material is for informational purposes only and is an overview of the capital markets and is intended for educational and illustrative purposes only. It is not designed to cover every aspect of the markets and is not intended to be used as a general guide to investing or as a source of any specific investment recommendation. Readers should conduct their own research before making any investments. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. In preparing this material we have relied upon data supplied to us by third parties. The information has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by US Capital Wealth Advisors, LLC, as to its accuracy, completeness or correctness. US Capital Wealth Advisors, LLC does not guarantee that the information supplied is accurate, complete, or timely, or make any warranties with regard to the results obtained from its use. Opinions included do not necessarily represent the views of US Capital Wealth Advisors, LLC. Please see USCWA’s ADV Part 2 for more information about USCWA.

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