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.