March marked the one-year anniversary of last year’s stock market low, as COVID fears continued to intensify and lockdowns were beginning. Since that time, a flood of government support prevented the economy from enduring a depression and fueling a remarkable market rebound.
The first quarter of 2021 provided investors additional growth. Another round of government stimulus and an accelerating pace of vaccination is driving optimism unleashing pent-up demand, reinforcing the investment theme “Green Light = Go!“. Yet returns tend to be less exuberant and more volatile as new bull markets enter their second year. This is not a “bearish” forecast; but rather an acknowledgement that market dynamics can be more frustrating in “Year Two Following the Low” even as economic fundamentals become more robust.
Indeed we are already experiencing a more choppy start to 2021. Much of the volatility relates to concerns about inflation – a topic of frequent client questions as the huge sums of government spending are recognized. The “Roaring 20s” was a decade of surging economic growth following recovery from wartime devastation and pent-up demand. 100 years later, there are some interesting parallels and other key ingredients causing many to wonder if higher inflation is on the way and how it may impact their portfolios.
Our personal finance article this quarter, “ARPA What?”, reviews how the most recent economic stimulus package is way more than direct payments to individuals/families; some strategic planning opportunities exist for many even if they do not qualify for a stimulus check.
A printer-friendly version of our quarterly newsletter can be obtained here: Q4 Nvest Nsights