Good morning, here's the latest news from your financial planner dude - Equities languished a bit this week due to continuing inflationary fears and weakness in some of the technology stocks that led the way in 2020. While the market in aggregate may be struggling, stocks in sectors tied to a reopening of the economy continue to fare well. Commodities, including industrial metals and oil, have been on the rise and have boosted the performance of economically sensitive sectors such as energy, industrials and materials. Travel related stocks have also begun showing signs of life. While business travel may be recovering slowly, there are some indications that leisure travel is making more of a comeback as many people have grown restless after the extended lockdowns. Although inflation is still very much on investors' minds, Federal Reserve Chairman Jerome Powell did ease concerns modestly in testimony given to Congress this week. While any upcoming fiscal stimulus that may be in the offing could be inflationary, Powell still feels that current state of inflation is soft and that the outlook for the economy is still quite uncertain. This eased investor concerns as it made clear the Fed would not raise rates any time soon. The markets’ movements in recent weeks are an excellent example of the importance of diversification. Looking at simply “market performance,” as measured by an index such as the S&P 500, returns have been rather muted. However, looking at the broader market shows that asset classes such as small cap value and large cap value have outpaced the market performance. Why? Because these asset classes often have exposure to many of the cyclical sectors that have performed well since COVID-19 vaccines were first announced late last year. While it can be jarring when it happens, a rotation out of the stocks and sectors that had performed well the prior decade and into those that had languished is quite common when a new economic cycle is emerging—and highlights the importance of remaining diversified through good times and bad. Stay safe and be well. Always a pleasure to set up a zoom call, a phone call, or answer your emails! Bryan Market comments based on indexes which are unmanaged and cannot be directly invested into. Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal. Diversification is an investment strategy that can help manage risk within your portfolio, but it does not guarantee profits or protect against loss in declining markets. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed. |
February 25 - Hendrickson's Market Update
