March 25 Weekly Market Update

What a difference a year makes. A year ago, the stock market was in the final throes of a furious COVID-19 driven sell-off. However, after the market bottomed out on March 23, it roared back to life with the S&P 500 Index rising more than 70% from its low last March and posting one of the greatest 12-month returns in history—a truly stunning recovery given all the world has gone through in the past year. But where do we go from here?

Earlier this week, the trading on economic reopening that had been dominating the markets for much of 2021 began to cool off. Economically sensitive areas from energy to financials struggled. Even the yield on the 10-year Treasury—which had been rising in recent weeks due to inflation fears—fell as the week began. While the rollout of COVID-19 vaccines in the U.S. has been going well and the number of new cases has been falling, the same has not been true in European nations such as Germany and Hungary. As such, some European countries are considering another round of lockdowns which is leading to concerns that the global economy may take longer to recover than many expected.

In the U.S., Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen both testified before the House Financial Services’ committee this week. One takeaway from Powell’s comments was that the U.S. is going to see some inflation this year given the unleashing of pent-up demand and ongoing supply-chain bottlenecks. However, his expectation is that any inflation seen will be neither significant nor persistent. Yellen’s comments centered more around taxation, mentioning considerations such as raising the corporate tax rate from 21% to 28% and potentially easing the $10,000 cap on state and local tax deductions.

While Powell and Yellen’s comments centered on near-term inflation and rising taxes, they also conveyed an upbeat tone regarding the U.S. economy. For example, the number of daily air travelers in recent weeks is well above the lows seen during the pandemic. Leisure travelers are finally starting to get back on the road. Restaurant sales are also on the rise. While consumer spending trends are still quite a bit lower than their pre-pandemic levels, things appear to be heading in the right direction.

Stay safe and be well.

The S&P 500® Index is a float-adjusted market capitalization weighted index that measures the large-capitalization segment of the U.S. equity market. It is not possible to invest directly in an index. performance is no guarantee of future results. Investing involves risk and the potential to lose principal.

The information provided is for educational purposes only and is not a recommendation of any kind or investment advice. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed.