WHAT WE ARE SEEING:
COVID-19
With three versions of the COVID-19 vaccine being produced and distributed, over four million Americans per day are currently receiving vaccinations.
President Biden has promised that there will be enough vaccines to inoculate all adult Americans by the end of May.
Stimulus Package
President Biden officially signed the American Rescue Plan of 2021 into law. The $1.9 trillion stimulus package provides a $1,400 stimulus check for each qualifying American, extends unemployment benefits through September, and provides additional funding for housing assistance.
The short-term benefits of this plan are legitimate, but there are concerns regarding the long-term impact of a plan of this magnitude, particularly concerning future inflation and US debt.
Earnings
Q1 earnings season presented a mixed bag of results. There were many positive trends, including the highest earnings growth since Q3 2018, and twice as many S&P 500 companies reporting positive forward-looking guidance as those reporting negative guidance.
While the broader news was mostly positive, certain sectors still struggled. Energy, utilities, and real estate sectors were hard pressed to meet earnings and revenue projections.
Economic Data
Many positive pieces of economic data were released for the first quarter:
The Federal Reserve released Q4 information on U.S. Household Wealth, which grew 10.1% last year to $130.2 trillion.
U.S. manufacturing output increased at the highest pace in the last three years.
Residential construction spending jumped 1.7% last month, bringing residential spending, non-residential spending, and public spending all to their highest levels in over 10 years.
WHAT IS BEING DONE:
Federal Reserve
The Federal Reserve indicated that there are no interest rate hikes likely through 2023, despite the improving outlook. The Fed has ramped up its expectations for economic growth, increasing GDP growth projections, and decreasing unemployment estimates. Additionally, Fed Chairman Powell indicated that The Fed anticipates inflation slightly above 2% in the near-term, with the rate settling in around 2% in subsequent years.
Economic Re-Opening
Many states and industries and beginning to re-open on a larger scale. This offers an additional opportunity for the American public to put the newly received stimulus checks to work.
SFG
With the prospect of future inflation increasing, we have continued to moderately trim back our exposure to technology stocks. These stocks tend to be hit particularly hard by inflation because their valuations are very dependent on future projected “real returns”.
We added additional exposure to commodities, with the addition of two new funds:
XME (SPDR S&P Metals & Mining ETF) – Tracks many different companies focused on various metals, including gold, silver, aluminum, copper, steel, etc. Some of these metals offer a nice hedge against inflation, while others offer growth potential.
PDBC (Invesco Diversified Commodity Strategy) – Tracks additional commodities, including crude oil and many agricultural commodities (corn, soybeans, sugar). This allows for participation in rising oil prices, and rising agricultural commodity prices, as a result of increasing Chinese consumption.
We are continuing to discuss with clients the importance of tax planning, given the anticipated changes to the tax code under President Biden. These discussions are varied in nature but some of the topics include ROTH IRA conversions, changes in gifting strategy, and estate planning.
IMPORTANT DISCLOSURES
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
These materials, opinions, analyses and information are provided for general informational purposes only based upon sources believed to be reliable and in good faith—but are not considered all-inclusive, and no representation or warranty of any kind, expressed or implied, is made concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we undertake no obligation to update such opinions, analysis or information, and no warranty or guarantee is made. The information in these materials may change at any time and without notice. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Please consult your attorney and/or accountant regarding legal and tax issues. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
Prices, quotes, rates and yields are subject to change without notice. Not FDIC Insured, Not Bank Guaranteed, and May Lose Value.
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates).
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.