Market Moves: Mach 1, 2021

The U.S. equity markets were down last week, with the Dow Jones, S&P 500 and NASDAQ posting losses of 1.70%, 2.41%, and 4.90%, respectively. With optimism surrounding the slowing of COVID-19 cases, new vaccine rollout, and the House’s passage of a $1.9 trillion stimulus bill, there is concern about market response to the looming fear of inflation. Here are some other insights on the markets and the economy from this past week:

Rising bond yields quelled the market’s momentum last week, despite signs of an improving economy. The NASDAQ took the largest hit, with a loss of 4.90%. The Fed’s aggressive monetary policy coupled with a large amount of government spending led to a bond selloff, as bets against inflation rise. The fear of inflation also has investors wondering whether the Fed may increase interest rates sooner than stated, which could weigh on the economy’s growth.

A sudden spike in U.S. Treasury rates on Thursday saw the yield on the 10-year note reaching 1.61% at one point. This was attributed to technical reasons, rather than fundamental; however, the yield on the five-year note surged to 0.75%, as well. Traders hurried to manage positions, with liquidity becoming an issue as open interest in Treasury futures collapsed across the curve. The moves do not appear to have a steady footing, with the 10-year yield closing at 1.44% at the end of the week.

With the rapid spike in yields last week, market fears that inflation is going to accelerate faster than policymakers suggest have solidified. Friday’s personal income data showed a surge of 10%, driven by stimulus checks, while spending rose 2.4% for the month. The Personal Consumption Expenditures (PCE) deflator, the Federal Reserve’s preferred measure of inflation, rose 0.3% for the month and 1.5% year-over-year. With more stimulus likely and continued vaccination progress, there is continued concern about an overheated economy.

The House passed the $1.9 trillion coronavirus relief package early Saturday morning. This came after the Senate parliamentarian, Elizabeth MacDonough, ruled that the proposed increase in minimum wage to $15 did not comply with House rules governing budget reconciliation. MacDonough’s ruling removed the largest point of conflict for Senate Democrats, as they look to pass the relief bill before the current unemployment programs expire on March 14, 2021.

The U.S. economy saw weekly jobless claims fall to 730,000 for the week ending February 20, which was well under the predicted 845,000. Continuing claims also fell by 101,000, bringing the total to 4.42 million; the lowest level since March of 2020. However, these numbers are unlikely to fully reflect those individuals who were heavily impacted by the winter storms that swept across the South.

The Centers for Disease Control (CDC) approved Johnson and Johnson’s COVID vaccine, adding to the growing list of vaccine distributors. This is the first single-dose vaccine approved by the FDA with test results showing a 66% effective rate at preventing moderate to severe COVID-19 cases. The Johnson and Johnson vaccine should reach providers in the coming days, with vaccinations starting soon after. While efficacy is lower than other vaccines, this vaccine provides an additional opportunity to combat COVID-19, particularly with its single dose.

Tenants behind on their rent are still waiting on the $25 billion in assistance that was announced in December of 2020, as millions of households and landlords are falling into debt. While money has not yet been distributed, Congress is looking to add an additional $20 billion for rental assistance. The distribution process differs by state, with some states announcing that distributions will begin later this month and others saying late spring, with assistance expected to be provided to the lowest income renters first.

Indices: Core Bond: Bloomberg Barclays U.S. Aggregate Index, High Yield: ICE BofA US High Yield, Large Value: Russell 1000 Value Index, Large Blend: S&P 500 Index, Large Growth: Russell 1000 Growth, Emerging Markets, MSCI EM NR USD, Foreign Equities: MSCI ACWI Ex USA NR USD, REITs: FTSE NAREIT All Equity, Small Blend: Russell 2000

Should you have additional questions, please contact your Cammack Retirement Group consultant or Note that this article was published on March 1, 2021. Data represented is as of the publication date. The information contained herein has been obtained from sources that are believed to be reliable. However, Cammack Retirement Group does not independently verify the accuracy of this information.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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