Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 14

Hope you had a nice long holiday weekend, and got to see the second half of the Gonzaga-UCLA matchup! What a shot to end that game

Recent Market Returns

The S&P 500 started off the month on a positive foot and closed at an all-time high last week.  There were plenty of good news items to help propel the gains. More on that in a moment—first, let’s feast on some recent market returns. 

The one-year total return for the S&P at the end of March was 56%.  That was the best quarter-end trailing one-year return for the S&P since the end of first quarter of 1935.  

Of course, if we just roll back a few more days prior to quarter end, the one-year return for the S&P 500 at the one-year anniversary of the bear market low from 2020 was 75%. The overall market, which also includes smaller companies, returned 85% over that same time frame. Small cap indices more than doubled. 

Again, for the S&P 500, its one-year gain was the strongest since the 1930s. For the Nasdaq 100, its one-year gain was its strongest since the Dot Com bubble in the ‘90s. For the Russell 2000, its one-year gain was its strongest ever, dating back to the index’s beginning in the late 1970s*. As investors, we are living in amazing times.

More crazy numbers from the first quarter:  the Energy sector was up 31% and Financials moved higher by 13%. Tech was up 2%. The average stock was up 16%.    

Even More Good News

First and foremost, vaccinations are taking place at a healthy pace around the country. This past weekend saw another daily record for vaccinations.  It seems everybody is booking summer plans. There is finally a feeling of optimism. (Recent stimulus checks don’t hurt.)

The economic data is also confirming economic strength and picking up momentum. Last week we saw strong manufacturing data (PMI) from around the world.  The unemployment data was also strong from last Friday, helping with a good start to the market. 

GDPNow from the Atlanta Fed is moving higher again.  Economic growth is expected to be strong this year.  Will it be like 1980s strong, 1950s strong, or even farther back to pre-WWII strong?  Plausible cases for all.

Recent comments from President Biden on his new $2.25T spending plan including massive infrastructure overhauls were also market-friendly, but came with potential large tax hikes. 

The market outlook still seems to support a cautiously optimistic mindset, in my opinion. Things are getting better, the Fed has provided massive support, and there is simply so much cash out there on consumer and corporate balance sheets that will surely find its way into the economy or the markets or both. 

But Don’t Forget About Inflation

From where I sit, I still think a possible risk factor in the months ahead is a potential inflation scare. This will be largely driven by base effects (i.e., bad numbers from a year ago scrolling off year-over-year comparisons), but will the higher headline numbers impact investor/consumer  behavior?  There is a theory that supports that concern

This coming week brings European holiday market closures on Monday, FOMC minutes, inflation data from the US and China, and trade balance data from the US.  

Have a great week! For more insights and commentary, visit our Financial Advisor Success Hub.

 

1137-OPS-04/05/2021

*https://media.bespokepremium.com/uploads/2021/03/The-Bespoke-Report-032621-h78j.pdf

The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

 

About Rusty Vanneman
Rusty Vanneman serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand. Rusty is a host of Orion’s The Weighing Machine podcast and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has also managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive in 2017. Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments. Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA).