April 2021 Market Recap

Anna Rathbun, Chief Investment Officer

As vaccination numbers continued to advance in the United States and restrictions on activity widely lifted across the country, the economic data did not disappoint. We saw growth in GDP for the first quarter of 2021, with personal consumption driving the gain. Certainly, the distribution of additional aid to households as a part of The American Rescue Plan Act did not hurt, as personal income also surged in March. This growth indicates that the economy is heating up, although we know this is happening under extraordinarily unusual circumstances. Prices are higher because of supply chain disruptions and resulting shortages; GDP gains have outpaced recent history due to the reopening effect and unprecedented fiscal aid. But for the month of April, good economic news set the stage for a supportive market environment, no matter the driving forces behind them.

Highlights

Stocks continued to march higher during April and the rates market stabilized.

COVID-19 cases continued to escalate in various parts of the world, particularly in India, and the markets ended the month with a little hesitation in the upward momentum.

Earnings season for the companies in the S&P 500 Index has not disappointed, however the markets have not rewarded these companies proportionately in terms of price reaction and it remains to be seen the near-term direction for equity markets.

Interest rate volatility took a pause in April, and the U.S. dollar fell to add currency gains for international equity.

The developed markets, represented by the MSCI EAFE Index, was weighed down by negative performance of Japan, but the European countries rallied to keep the index in positive territory.

Emerging market equities were mixed. Meanwhile, India posted muted returns as its struggle with the pandemic escalated and made global headlines.

Rates took a breather during April, with the 10-year yield falling by the end of the month. Falling rates were generally good for fixed income investments with longer duration profiles, and the Bloomberg Barclays Investment Grade Corporate Index and the Aggregate Index made a comeback.

High yield corporate index also posted comparable returns despite its lower duration profile, aided by compressing corporate spreads and higher coupon return.

The Federal Reserve held ground at the April meeting, keeping policy unchanged and its attitude toward inflation and the employment situation consistent with past communications. The Fed noted the improvement in economic conditions, but it still believes that some time is needed to gain momentum.

Dallas Fed President Kaplan made a comment that was in direct conflict with the communication from Chairman Powell two days earlier; in response equity markets fell and the benchmark 10-year yield rose.

Looking Ahead

Since last month, another ambitious proposal from the White House made its way into the public discourse: The American Families Plan. This spending plan is to be funded by more tax hikes, and on the spotlight is the capital gains tax for certain bracket of American individuals. This, coupled with the potential corporate tax increases to fund the infrastructure plan are still in nascent stages, but will be topics of discussion for the markets in the coming weeks. Globally speaking, another tug-of-war between COVID-19 infections and economic growth is rearing its head. This time, it is derived from the differences in vaccination progress in various parts of the world. Vaccination feels like a triumph here in the United States, but as we make progress in inoculating our public, other countries are experiencing additional waves of infections. It will be difficult to resolve the global supply chain issues that we are hearing about from corporations as long as COVID-19 is still raging in various parts of the world. Simply put, we need to heal together.

More Information

For more information on the April financial market activity, please contact CBIZ Investment Advisory Services.


The information included in this update is provided for informational purposes only and should not be construed as investment advice. The views expressed are those of the author based on the data available when this update was written and are subject to change based on market conditions or other factors. CBIZ Investment Advisory Services and/or CBIZ Retirement Plan Services disclaims any liability for any direct or incidental loss incurred by applying information supplied in this update.

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April 2021 Market Recaphttps://www.cbiz.com/Portals/0/RPS/Images/Stock Images/iStock-131957725.jpg?ver=2020-07-14-114334-583https://www.cbiz.com/Portals/0/RPS/Images/Stock Images/iStock-131957725.jpg?ver=2020-07-14-114334-583As vaccination numbers continued to advance in the United States and restrictions on activity widely lifted across the country, the economic data did not disappoint. 2021-05-04T16:00:00-05:00As vaccination numbers continued to advance in the United States and restrictions on activity widely lifted across the country, the economic data did not disappoint. Regulatory, Compliance, & LegislativeInvestment AdvisoryRetirement Plan ServicesAccelerated RecoveryCOVID-19Yes