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Quick Takes

● March by the numbers. U.S. stocks were up nicely in in March. The headline S&P 500 index returned + 4.4% (with dividends), its fourth positive month in the last five. All 11 sectors posted positive results, led by Energy (+29.3%). Large Value topped equity styles with a +5.9% gain following +6.0% last month.
● Jobs recovery. On Thursday March 25th,the weekly unemployment claims fell under the pre‐pandemic record of 695,000 for the first time in a year and the U.S. economy added 916,000 new jobs in March with the unemployment rate falling to 6.0%.
● Still very few bids for bonds. Bond woes continued in March as the trend of rising bond yields persisted for virtually the entire first quarter. The 10‐year US Treasury yield ended March at 1.75%, versus 0.51%at the lows in August 2020 and 0.91% at the start of 2021. It was the largest quarterly rise since 2016.
● Don’t count growth out. Value trounced Growth for the month and the first quarter, but Growth showed signs of fighting back in March. Growth had four of its largest five days of outperformance against Value for 2021 during March (using Russell 3000 indices).

Asset Class Performance

In March U.S. and international bonds fell further into negative territory for 2021. Emerging Markets equities fell the most in March and lost their 2021 relative outperformance versus U.S. and international developed stocks.

Stocks at record highs, volatility at pandemic lows, jobs recover

Stocks continued to rally on better‐than‐expected economic activity, faster‐than‐expected COVID‐19 vaccinations, and additional fiscal stimulus on the way. That’s a welcome relief following the weak economic results in February that largely resulted from unusually severe winter weather across large swaths of the U.S. Retail sales, industrial production, and housing activity, among other economic activity, suffered in February. But as expected, the soft February economic data was indeed temporary. March data, in contrast, has been quite strong and robust. Consumer sentiment, consumer confidence, manufacturing activity, and vehicle sales were solidly higher in March, many blowing away economist’s estimates. As a result, the S&P 500 index traded up to an all time high on March 26… and subsequently surpassed that high, and the 4,000 index level, on the first day of April. The number of index members trading above their 200‐day moving average stands near multi‐year highs. The index returned +4.4% (with dividends) for the month, its fourth positive month in the last five, and all 11 sectors posted positive results – led by Energy with a +29.3% gain. For the quarter it was up +6.2%, making it positive in 8 of the last 9 quarters. Though they only advanced +1.0% in March, small caps were big winners for Q1‐2021 with a +12.7% gain for the Russell 2000 index. The healthy stock returns, improved sentiment, and strong economic growth has resulted in the lowest stock market volatility in about 14 months. As shown in the chart below, the CBOE Volatility Index (VIX) fell to 18.9 on March 26 (and all the way to 17 on April 1), after being at it all‐time historic high of 82.7 just about 12 months earlier on March 16, 2020 at the onset of the COVID‐19 pandemic. One area of the economy that has remained stubbornly below pandemic levels has been the labor market. But in March, it too showed tremendous improvement. The March employment report—released on Friday, April 2 when U.S. stock exchanges were closed—delivered a bevy of positive surprises. The U.S. economy created 916,000 jobs in March—far exceeding expectations. And initial jobs gain estimates for January and February were revised higher by a total of 156,000. The unemployment rate fell to 6.0% from 6.2%, a pandemic low. Average weekly hours worked lengthened to 34.9 from 34.6 hours and labor‐force participation rose to 61.5% from 61.4%. Almost every major sector of the labor force grew, led by leisure and hospitality with +280,000 new payrolls. As good as these numbers are, the labor force remains ‐8.4 million fewer jobs than last February before the pandemic. But as the economy accelerates, payrolls momentum may be sustained as more people get vaccinated and states lift COVID‐19 restrictions.

Bottom Line: February economic data was unexpected soft, but ultimately a temporary setback due primarily to the vast and brutal weather that swept across most of the country. March has brought renewed strength across virtually all sectors of the economy, including the labor market.

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©2021 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.

Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

 

Chris Bouffard
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