Category: Monthly Commentary

Monthly Commentary

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.

Index PerformanceAprilYear to DateTrl. 12 Months
US Stocks (Russell 3000)5.15%11.83%50.92%
Foreign Stocks (FTSE AW ex US)3.01%6.89%44.43%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.50%-1.37%1.09%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.42%0.21%5.03%
Cash (ICE BofA ML 3-Mo T-Bill)0.00%0.03%0.11%

March Market Commentary

Market Commentary

US stocks climbed to new record highs in March driven by another round of fiscal stimulus and improving vaccination numbers.  The $1.9 trillion American Rescue Plan was signed into law providing checks for individuals, funds for municipalities, and additional funding for vaccination efforts.  Vaccine doses have reached 2 million per day in the US and all adults should be eligible for vaccines by May 1st.  New COVID-19 cases remained at lower levels during the month.  Economic news showed an economy steadily accelerating.  Manufacturing activity increased at its fastest pace since the start of the pandemic, and service sector activity expanded for the 9th consecutive month. Jobs data continued to improve with 379,000 new hires in February and January’s hiring numbers were revised higher.  The unemployment rate dropped to 6.2% and weekly initial jobless claims dropped to 658,000 at the end of the month, the lowest level since the pandemic began.  Consumer confidence hit its highest level since March of last year.

Foreign stocks rose on optimism over an economic rebound.  However, Europe is still struggling to get a hold of COVID-19. Rising cases drove Germany, France, and Italy to reinstate lockdowns during the month.  The ship that was stuck in the Suez Canal snarling global shipping and supply chains for six days was finally freed.  At the conclusion of the ECB’s meeting, they announced they would increase the pace of eurozone bond purchases given the recent rise in interest rates and left its benchmark interest rate unchanged. OPEC and its allies kept production cuts in place when most economists were expecting an increase.  Oil prices hit their highest levels since April of 2019 before cooling off later in the month.  China said it would target 6% growth for the year, which is comfortably lower than the 8% expected by most of the world’s economists.  Emerging markets trailed developed markets over the month and first quarter, but outpaced developed markets over the trailing twelve months.

Bonds declined over the month as interest rates continued their climb higher on the expectation of strong economic growth this year.  After the Fed’s March meeting, they pledged to maintain their easy money policies well into the future and did not express concern over the recent increase in interest rates.  They also raised their economic outlook, expecting growth of 6.5% in 2021. In Congressional testimony, Fed Chair Powell said the US still had a long way to go to recover and that he did not believe the recently passed stimulus bill would lead to excessive inflation.  The 10-year Treasury yield ended the month at 1.74% up from 1.44% at the end of February.  It’s the highest level of the year and its highest point since January of last year.  Over the month and quarter muni and Treasury bonds were the top performing sectors, while over the trailing year credit bonds led the way.  Longer term bonds trailed shorter term bonds in March and the first quarter, while over the last twelve months performance was mixed based on sector.


Index PerformanceMarch1QTrl. 12 Months
US Stocks (Russell 3000)3.58%6.35%62.53%
Foreign Stocks (FTSE AW ex US)1.48%3.77%50.97%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.78%-1.86%2.01%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.37%-0.21%4.39%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.02%0.12%

February Market Commentary

Market Commentary

US stocks bounced back in February on optimism over the economy and additional fiscal stimulus, but ended on a down note as interest rates climbed to end the month.  The House passed the $1.9 trillion stimulus relief bill, and it is headed to the Senate.  The stimulus would provide significant support for the economy after household income climbed 10% in January as a result of the December stimulus bill.  With 96% of S&P 500 companies reporting earnings to date, earnings are on track to rise by 3.6% in the fourth quarter, when a decline of 11% was expected.  In addition, new COVID-19 cases plummeted over the month with the average seven day rate at its lowest level since October.  Economic news was generally positive over the month.  The January jobs reports showed the economy moved back to adding jobs and the unemployment rate fell to 6.3%.  In addition, initial jobless claims fell over the month and hit their lowest level since November. Service sector activity rebounded more than expected in January and consumer confidence rose in February for a second straight month.  Retail spending rose 5.3%, the most in seven months, and manufacturing activity continued to expand.

Foreign stocks climbed in February on optimism over global economic growth.  To date, the impact of targeted lockdowns in Europe seems less severe than those employed earlier in the pandemic.  Manufacturing activity improved and business and consumer sentiment picked up in the region.  OPEC issued a statement asking member countries to maintain production cuts.  Oil prices jumped 18% to $61.50 a barrel over the month.  India announced plans to boost economic growth and healthcare spending. Global central banks continued to be accommodative with the latest example being South Korea.  The country elected to keep its benchmark interest rate at a historic low.  Emerging markets trailed developed markets over the month, but outpaced developed markets over the trailing twelve months.

Bonds fell over the month as interest rates moved sharply higher on optimism over the economic recovery.  Meeting minutes from the Fed’s January meeting showed officials agreed to continue to hold the Fed Funds Rate near zero and to maintain the current level of bond buying.  While they thought that there may be an increase in inflation, they didn’t believe it would be long lasting.  In Congressional testimony, Fed Chair Powell reiterated the Fed’s plans to keep the Fed Funds rate low for the foreseeable future as “the economy is a long way from our employment and inflation goals.”  The 10-year Treasury yield rose to over 1.5% before settling at 1.44%, its highest level since February of last year.  The benchmark rate has climbed from 0.93% to start the year.  Over the month agency bonds were the top performing sector, while over the trailing year, credit bonds led the way.  Longer term bonds trailed shorter term bonds in February and over the last twelve months.

Index PerformanceFeb.Year To DateTrl. 12 Months
US Stocks (Russell 3000)3.13%2.67%35.33%
Foreign Stocks (FTSE AW ex US)2.03%2.26%27.32%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.82%-1.09%2.35%
Municipal Bonds (BBgBarc 1-10 Yr Muni)-0.92%-0.58%1.54%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.02%0.40%

January Market Commentary

Market Commentary

US stocks declined slightly to start the new year as optimism at the beginning of the month gave way to concerns about the continued spread of the coronavirus.  The new administration announced plans for a $1.9 trillion stimulus relief bill which would include additional stimulus checks for individuals, buoying markets over the first half of the month, but the spread of a new, more contagious, strain of the virus and concerns over the vaccine effort weighed on the outlook to end the month.  Corporate earnings have also impressed to date with the majority of companies topping expectations.  Economic news over the month showed a mixed picture.  On the positive side, manufacturing activity hit its highest level in two years, household income rose for the first time in three months, business activity picked up pace and consumer confidence rose.  However, the December jobs reports showed a loss of 140,000 jobs while the unemployment rate remained at 6.7%.  New unemployment claims remain elevated and retail sales fell 0.7% in December.  Fourth quarter GDP grew at a 4% rate, but fell short of expectations.

Foreign stocks edged up in January led by emerging markets.  European markets ticked down over the month as a new, more contagious strain of the coronavirus spread across the continent and drove additional business restrictions.  Factories in Asia and Europe increased their output in December pointing to a strong manufacturing sector. Saudi Arabia announced it would cut oil production by 1 million barrels a month starting in February as it’s grown concerned over a resurgent coronavirus.  Oil prices climbed 7.6% over the month.  China posted GDP growth of 6.5% in the fourth quarter, and 2.3% for the year despite the pandemic.  It was the only major world economy to see growth in 2020.  Emerging markets outpaced developed markets over January and the trailing twelve months.

Bonds fell to start the new year as interest rates rose on the expectation of increased stimulus measures from the new administration.  The Fed concluded its January meeting keeping all its supportive policies in place.  They stated the economy has cooled off more recently as a result of the upswing in COVID-19 cases and supportive measures will be needed for some time. The 10-year Treasury yield ended the month at 1.11%, its highest level since March, up from 0.93% to start the year.  Over the month muni and credit bonds were the top performing sectors, while over the trailing year, credit bonds led the way.  Longer term bonds trailed shorter term bonds in January, but outpaced shorter term bonds over the last twelve months.

Index PerformanceJan.Trl. 12 Months
US Stocks (Russell 3000)-0.44%18.64%
Foreign Stocks (FTSE AW ex US)0.22%12.97%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.28%4.93%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.35%3.13%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.56%


December Market Commentary

Market Commentary

US stocks ended a roller coaster year at a new record high.  After plummeting in late February and March as a result of the coronavirus and the resulting business shutdowns, the market rallied over the remainder of the year driven by Fed and US government stimulus, business reopenings, better than expected corporate earnings, and finally a variety of highly effective vaccines for COVID-19.  Both the vaccine and the second pandemic relief bill were the main drivers of performance in December.  The $900 billion relief bill provides stimulus checks for individuals, additional funds for the paycheck protection program, and funding for vaccine distribution.  The Pfizer and Moderna vaccines received emergency approval and the vaccines began being administered during the month.  The approval was a significant step forward as hospitalizations and case numbers have continued to hit new highs.  Corporate earnings were surprisingly resilient after the shutdowns in the first and second quarter with much better than expected results over the second half of the year.  Economic news over the month showed the US still rebounding, but struggling under the weight of increasing COVID-19 cases.  The November jobs reports disappointed with 245,000 jobs added, less than half the gains of October, but the unemployment rate edged down to 6.7% from 6.9%.  New unemployment claims remain elevated.  Retail sales fell 1.1% and consumer confidence eased.  The housing market was a strength of the economy over the year with home prices reaching record highs and more mortgages were taken out than any year on record.

Foreign stocks climbed in December on a variety of positive developments.  The UK was the first western country to issue emergency approval of the Pfizer vaccine and begin distribution.  However, a new, much more contagious strain of the coronavirus was discovered in the country and prompted new lockdowns and travel restrictions.  After marathon negotiations, the European Union (EU) reached a spending deal for additional pandemic relief.  The European Central Bank (ECB) announced they would increase their bond buying program from $607 billion to $2.25 trillion and extended it until at least March 2022.  They also provided support for the banking system, boosting liquidity through several measures until June 2022.  The EU reached a trade agreement with the UK over its exit from the country bloc averting potential business chaos if the UK left the country bloc at the end of the year without a deal in place.  It puts an end to the Brexit saga that started four and a half years ago.  OPEC members and a group led by Russia agreed to increase oil output by 500,000 barrels a day starting in January as they believe the worst of the pandemic is over.  China’s economic activity continued to rebound in November.  Industrial output, investment, and consumer spending all picked up pace in November and manufacturing hitting its highest level in a decade.  Emerging markets outpaced developed markets over December, the fourth quarter, and the year.

Bonds posted gains to end the year that saw interest rates hit record lows and the Fed take unprecedented actions to help support the economy.  Information released at the conclusion of the Fed’s December meeting showed officials expect the Fed Funds rate to stay near zero through at least 2023.  The Fed has also been buying $80 billion in Treasurys and $40 billion in mortgage bonds a month and said that buying would continue “until substantial further progress has been made” toward broader employment and inflation goals.  The 10-year Treasury yield ended the year at 0.93%, up from 0.84% to start December, but down significantly from the 1.92% where it started the year.  Over the month and fourth quarter, credit and muni bonds were the top performing sectors, while over the year, credit bonds led the way.  Longer term bonds outpaced shorter term bonds over December, the quarter, and 2020 as a whole.


Index PerformanceDec.Q42020
US Stocks (Russell 3000)4.50%14.68%20.80%
Foreign Stocks (FTSE AW ex US)5.50%17.18%11.47%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.21%0.48%6.41%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.35%0.82%3.95%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.03%0.66%

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.  Source: Morningstar, Inc.