“Marching” to New ATHs
Market Update, 2021-04-04: Marching to new all-time-highs (ATHs). Despite the hyped headlines and supposed market volatility, stocks finished the first quarter at more new ATHs. With a return of 5.7% for the S&P 500 for the first quarter, 2021 ranks third in first-quarter performance during the last 10 years. With a 5.5% gain, the first quarter of 2017 now drops to the fourth-best start in the last decade.
First-Year Presidential Cycle for Markets?
Frequent readers, do we see the on-going similarities? 2021 repeating 2017? First-year presidential cycle? Investors should also review what worked in 2013. The top two years for first-quarter returns were 2012 (12%) and 2013 (9.9%). In all these prior years, the index finished the year higher than it was at the end of March. In other words, as our 2021 outlook previously stated, it’s a bull market for stocks — except two brief periods in 2021: late February through early March and Late June through early July.
Small Caps Marching Sideways
Some investors are now concerned about the recent slowdown in the small caps as measured by the Russell 2000. Investors: that index rose 12% in Q1 2021! Moreover, this followed a 28% rally in Q4 2020. The recent sideways stalling by small caps should be no surprise: The rise in long term interest rates has slowed the last few weeks.
Value Buying in the Markets
The Dow Jones 30 (represented by the “DIA” ETF) found renewed buying interest, as “value” came back into style by posting a gain of 7.7% in the first quarter. This is one of OHFG’s larger ETF holdings in our investment models. The “boring” Dow Transports were anything but dull this quarter as they rose over 17%. The tech-heavy NASDAQ Composite, leader of the market advance for over the last 10+ years, traded sideways to post a gain of 2.7%. In a true bull market like this, the once-strong areas pull back, and the weaker ones pick up the slack as the fundamental backdrop is slowly adjusting to a different economy.
Consumers Savings Marching Into the Markets, Someday
Starting the second quarter, consumers have $3.1 trillion more cash in their checking accounts than they usually do. And even more cash is on the way. Following the injection from the latest stimulus checks, total surplus savings is likely to climb to $4.0–5.0 trillion.
Economy Marching on This Fall
Although the economy is currently slowing as it normally does during the midyear, expect this capital to reaccelerate the economy come late-Q3 and -Q4 2021, through Q1 2022.
Resources
Last Fridays Podcast: Unprecedented-Myth Busting
Interesting Reading:
- https://www.marketwatch.com/story/heres-the-4-5-trillion-firepower-that-will-drive-stocks-higher-in-april-says-top-strategist-11617621774
- https://fsinsight.com/event/fsinsight-presents-bitwise/
Markets: Cumulative Total Returns, Week Ending 2021-04-04
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