Fidelity Bank - Wealth Management
April 2021 Market Review
April saw strong economic forecasts turn into economic fact. The US economy grew at an annualized pace of 6.4% in the first quarter. The median 2021 GDP forecast compiled by Bloomberg now expects a 6.3% GDP growth for 2021. US retail sales grew 9.8% in March alone, and now sit 17% above the pre-pandemic level. The jobs report published on April 2nd showed that employers added 916,000 workers to payrolls in March. This was the third straight month of higher payroll numbers and demonstrates promise of an economic recovery. Unsurprisingly, bars, restaurants, and clothing stores – businesses that have suffered most from the pandemic – saw some of the largest gains. For April, the S&P 500 gained 5.34% while the Bloomberg Barclays US Aggregate Bond Index gained 0.79% as interest rates fell from their March highs.
Fresh off the passage of the American Rescue Plan(ARP), Washington introduced for two bills for debate: the $2.3 trillion American Jobs Plan, which is designed to invest in the country’s infrastructure, and the $1.8 trillion American Families Plan (AFP), which aims to support family formation and an equitable recovery. The AFP also extends many of the key tax credits from the ARP. However, these massive spending bills are stoking inflation fears in an economy that appears to be robustly recovering. The Federal Reserve continues to target a long-term 2% inflation goal and has indicated a willingness to allow inflation to trend above 2% in the short-term. Market implied 10-year inflation reached 2.42% near the end of April, the highest implied inflation rate since 2013.
A strong earning season and interest rates falling off of their March highs helped Large Growth best Large Value by about 2.8% in April. However, year-to-date Large Value is outperforming Large Growth by nearly 8%. Interestingly, from a factor perspective, those stocks with the highest degree of leverage outperformed those with the least debt exposure by more than 4% in April.
All 11 Global Industry Classification (GIC) sectors were positive in April. Real Estate, Financials, and Consumer Discretionary were the leaders advancing 8.28%, 6.57%, and 6.48%, respectively. Year-to-date, Energy and Financials are leading the way gain 31.60% and 23.61%, respectively.
As the rally in Treasury rates subsided, the US Dollar weakened by 2.09% versus developed market currencies and by 1.47% versus emerging market currencies in April. The weaker US Dollar enhanced returns for US investors in both international developed and emerging markets. For April, the MSCI EAFE index gained 1.26% in local currency terms but gained 3.01% in US Dollar terms. A similar story played out in Emerging Markets; the MSCI Emerging Markets Index gained 1.60% in local currency and the conversion to US Dollars increased that gain to 2.49% for US investors.
Fixed Income investors were provided some welcome reprieve from rising longer-term interest rates in April. Inflationary pressures have caused longer term interest rates to rise steadily since August. 7-to-30-year rates each fell by more than 10 basis points in April. Falling rates boasted Treasury prices by 0.75% and TIPS rose by 1.40% in April.
Falling rates and tightening spreads helped Investment Grade Credit and High Yield Bonds return 1.11% and 1.09%, respectively.
Emerging Market Local Currency Debt welcomed the April weakness in the US Dollar. For the month, EM Debt gained 2.26%. Year-to-date the asset class is down 4.57% as stronger dollar and rising rates dampened returns.
The Bloomberg Commodities Index jumped 8.29% as rising inflation expectations and demand boosted prices. Agriculture, Softs, and Industrial Metals led the way in advancing 14.05%, 12.44%, and 8.82%, respectively. Lumber prices have continued to surge over the past several months as stiff demand for lumber for renovation projects and new construction continues with tight supply. Lumber futures advanced more than 48% in April alone!
Real Estate Investment Trusts (REITs) bounded higher by 8.12%. REITS, which have struggled as a result of the pandemic, rose as confidence in the economic recovery, positive vaccine news, and consumer data helped propel the asset class forward. Year-to-date REITs are outpacing the S&P 500 by 5.27% (17.11% vs. 11.84%).
Fidelity Bank has built a strong history as trusted advisors to clients served, and is proud to be an active member of the community. With 20 branches located throughout Northeastern Pennsylvania and the Lehigh Valley, Fidelity Bank offers full-service Trust & Investment Departments, a mortgage center, and an array of personal and business banking products and services. The Bank provides 24 hour, 7 day a week service to clients through a variety of digital banking tools, branch offices, online at www.bankatfidelity.com, and through the Customer Care Center at 1-800-388-4380.
Daniel J. Santaniello, President, and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at blog at fddbank dot com. We would love to hear from you.
April 2021 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data, if not otherwise noted, is as of 4/30/2021. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large‐cap segment of the U.S. equities market.