Market Outlook - March 2021
Bond Market
Bonds were again negative in March as long-term rates rose to 1.74% by the end of the month. Bond credit spreads, or the premium paid to take on default risk, rose slightly in the month but remains well below long term averages. Myself and Copley Financial Group, Inc’s financial advisors have had an unattractive stance on bonds since the beginning of the year, as our continued expectation is for long term rates to rise.
At this time, we remain relatively negative on bonds, but as interest rates rise above 2.00%, this may be a time to begin a new look at bonds as income generation will be once again enough to take some price risk. For new money allocations, we continue to recommend the Fixed Income Total Return as the lower duration profile and flexibility offer a chance to protect assets from significant interest rate rises while also providing ballast on overall volatility.
Stock Market
Stocks continued to rise in March and are now showing significant one-year gains after the anniversary of the initial COVID-19 correction. The rotation to recovery names continues to drive the markets higher, offsetting some recent stagnation in the large technology stocks. We are beginning to see some signs of value in that space, and if weakness persists among high quality technology stocks, this could provide a catalyst for a shift in our allocations. For new money allocations, we continue to recommend a balanced approach with both growth and value stocks.
The stock market continued its strong start to 2021 with the S&P 500 advancing 4.38% in March bringing the year-to-date returns to 6.17%. Even more impressive is the one-year return of 56.31%, coinciding with market bottom of March 24, 2020 caused by the COVID-19 induced market selloff. U.S. small cap stocks have been exceptionally strong, rising 0.99% in March and 12.65% in 2021, almost doubling in a year returning 94.67% since March 31, 2021.
Source: Gradient Investments
If you want to go over in detail about the changes that happened during the month of March, contact me or your Copley Financial Group, Inc. financial advisor, and we will be more than happy to walk you through them. Here at Copley Financial Group, Inc. with locations in San Diego, CA. and Uniondale, NY. the team and myself will be with you in every step of this process.
