Hope all is well. It was also a fairly quiet week on the economic calendar and headline front, producing a rather small finish to the upside. This week instead of going over the news much of which highlights the same trends from previous weeks. I thought it made sense to take a look at where we are today 1 year out from where the market bottomed last year. The market rebound has been powered by expectations for the economic recovery and commensurate rebound in corporate profits. Three primary factors have been in the driver's seat: the vaccine (first development, then distribution), monetary-policy stimulus (near 0% rates), and fiscal aid (PPP loans, stimulus checks, etc.). This trifecta has formed a solid foundation upon which the economic recovery commenced and from which the new bull market launched.
Here's the markets since last year (Nasdaq in black, S&P in blue, Dow in red)
The path ahead for the stock market may be a bit windier. Faster economic growth and increasing corporate profits will help justify recent strong stock-market gains and elevated valuations. At the same time, the path ahead will produce more moderate gains as much of the rally has been in anticipation of that growth. More volatility is likely in store. Expect inflation and interest-rate worries to continue to be a primary source of anxiety. That should not undermine the bull market but anticipate a temporary pullback in the 10 to 15% range at some point during the year. With the S&P at an all-time high it could be time to take some risk off the table and lock in gains. If you have money in the stock market that you intend to spend in the next 2 years now might be a good time to move that money out of the market.
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