Stocks were a bit mixed to begin the holiday-shortened week. Some investors’ worries were elevated by concerns the recent rise in long-term interest rates could hamper the nascent economic recovery. Others believe the rate increase is a sign that inflation may be looming. Regardless, volatility has reigned this week. Early in the week, the yield on the 10-year Treasury bond hovered around 1.30%, a level not seen since February of last year. This benchmark yield is important—it is often used as an anchor for the rates of many types of loans, including mortgages and student loans. While rates are still low by historic standards, the directional uptick could lead to a slowdown in consumer activity. From a sector perspective, the impact of this rise in rates is a bit bifurcated. Higher yielding sectors of the market, such as utilities and real estate investment trusts (REITs), have struggled while banks have fared well as lower interest rates allow them to borrow money at low short-term rates and lend at higher long-term rates. The energy sector, which has been one of the best performing sectors in 2021, continued its winning ways this week. The sector has benefited from constrained supply and hopes that demand will pick up as the economy continues to mend. Supply became further constrained this week as a historic cold snap and snowy weather overtook nearly three-quarters of the U.S. In doing so, oil production was hampered, even in southern states such as Texas. The frigid weather also has created good and bad news on the COVID-19 front. The bad news is that dangerous driving conditions and power outages have slowed the rollout of vaccines. The good news is that this same poor weather has forced many individuals to stay home and, as a result, the number of new cases has fallen dramatically. Furthermore, President Joe Biden said this week that all Americans will have access to vaccines by August; his administration has pushed pharmaceutical companies to sell doses to the U.S. at a faster rate than anticipated. While this has been a challenging few months for multiple reasons, spring is right around the corner which reminds us that winter—like everything else we have experienced over the past year—shall soon pass. Stay safe and be well. Bryan Market comments are 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. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed. |
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