April Market Commentary

Market Commentary

US stocks surged in April posting their best month since November on optimism over the economic recovery and a jump in corporate earnings.  With roughly 75% of S&P 500 companies reporting earnings to date, over 80% of companies have beaten analysts’ estimates. The vaccination rate continues to grow with roughly 45% of the US population vaccinated and new COVID-19 cases at their lowest level in months.  Economic news in April reflected a growing economy.  The March jobs report showed 916,000 new hires and the unemployment rate fell to 6%. Initial unemployment claims reached a post pandemic low.  Factory and service sector activity surged.  US auto sales are nearing levels seen before the pandemic and retail sales in March jumped 9.8%.  Reflecting the recent economic acceleration, consumer prices rose 2.6% in March over the past year.  US GDP grew at a 6.4% rate in the first quarter bringing the economy within 1% of the level it reached prior to the pandemic.  Household income soared 21.2% in March driven by stimulus payments.

Foreign stocks climbed on expectations of a continued economic rebound, but COVID-19 continues to be a significant problem globally with surging cases in Japan, Brazil, and India.  The European Union (EU) has struggled to vaccinate its population with only 21% of its citizens receiving at least one vaccine to date, but the EU is targeting having 70% of its population vaccinated by July.  The European Central Bank (ECB) left their benchmark interest rate and bond buying program unchanged after their April meeting and said they would likely remain supportive longer than the Fed.  Economic numbers are improving with Eurozone factory activity growing at its fastest pace in over two decades.  OPEC and others affiliated with the group agreed to increase oil production by over two million barrels a day on expectations of an economic rebound.  China reported first quarter growth of 18.3%, a record, putting it well ahead of its 6% targeted pace for the year.  Emerging markets trailed developed markets over the month and year to date, but outpaced developed markets over the trailing twelve months.

Bonds saw gains over the month as interest rates took a step back.  Minutes from the Fed’s March meeting showed the group continued to remain dedicated to supporting the economy and was not concerned with the potential for inflation.  At their April meeting they left their policies unchanged.  Fed Chair Powell said the Fed would cut bond purchases “well before” raising the Fed Funds Rate. The 10-year Treasury yield ended the month at 1.65% down from 1.74% to start the month.  Credit bonds led the way over the month and year to date.  Longer term bonds topped shorter term bonds in April, but shorter term bonds have outpaced so far in 2021.