Please find this month’s market updates below. This list is intentionally brief and uses ETFs that are readily available to all investors to represent the major markets. In the second section, there are five simple portfolio mixes, which are described by low-cost Vanguard ETFs. These can be used as a guide against which to compare your portfolio mix. We hope these few, but important, data points are of value to you.
– The AdvicePeriod Team
Monthly Market Review
By Nathan Sonnenberg
AdvicePeriod Chief Investment Officer
With some 50,000 Americans still being diagnosed with Covid-19 daily, it’s far too soon to declare that the pandemic’s toll is behind us. However, April’s economic and market numbers provide encouraging signs.
It’s true that employers added just 266,000 jobs during the month — far fewer than expected — and the jobless rate rose slightly, to 6.1%, as more Americans rejoined the labor force. But the S&P 500 index returned 5.3%. And the economy expanded in the first quarter by an estimated 6.4% on an annualized basis as Americans shelled out stimulus money, especially for durable goods. As New York Times economics columnist Neil Irwin wrote: “Enjoy your Pelotons and Big Green Eggs, everybody.”
Let’s take a closer look at April’s capital markets. The total U.S. stock market (VTI) rose a robust 5.04%. International equities (VEA) were up 3.05%. Emerging market equities (VWO) gained 1.79%, bouncing back from a March decline. The strong month for stocks unfolded against the backdrop of positive first-quarter earnings reports from U.S.-based companies. With 60% of the companies in the S&P 500 reporting, 86% posted higher-than-anticipated earnings per share.
The good news extended to bonds: The total U.S. bond market (BND) was up 0.87% in April, while muni bonds (MUB) rose by 0.76%.
Meanwhile, the economy continues to recover. The Atlanta Fed is now projecting annualized gross domestic product growth of 13.6% for the second quarter, more than doubling the first quarter’s result. But the April jobs report underlines the fact that we’re not out of the woods quite yet. Economists had forecast a gain of one million jobs, yet The Wall Street Journal noted, “many businesses are reporting they can’t find enough workers, a phenomenon that could restrain economic growth in the coming months.”
In addition, the threat of rising inflation remains a concern. As we noted in a recent client letter, the consumer price index jumped 2.6% for the 12-month period ending in March, the biggest increase since August of 2018. But in April, at least, markets shrugged off inflation fears–perhaps betting that rising prices were a temporary blip. And while the specter of rising prices had pushed up interest rates in recent months, those rates drifted down a bit in April: 10-year Treasury bond yield fell from 1.75% to 1.63%, and 30-year Treasury yields dropped from 2.42% to 2.30%.
The big picture, then, is that the economy and markets are continuing to strengthen. Though it may be in fits and starts, America is recovering. But what matters to us most, of course, is how you and those you care about are faring. Please don’t hesitate to reach out if you’d like to discuss your goals, your investments, or your overall financial situation.
Major Market Index Returns Period Ending 5/1/2021 (Annualized)
Selections include ETFs generally available to consumers. Returns are annualized and net of management fees but do not include trading and advisory fees. Return source: Morningstar. AP Disclosure
Sample Portfolio Mix Returns (Annualized)
Global portfolio mixes are Stocks/Bonds and are represented by VT/BND; returns are annualized. Vanguard funds are a net of all management fees but do not include trading and advisory fees. Return source: Morningstar. AP Disclosure
What You Pay For: The Percentage of Active Managers That Underperform Their Benchmarks
Trailing 10 Years Numbers As of December 31st, 2020 – S&P Spiva Scorecard
Percentage of US large-cap funds that underperformed their benchmarks
US large-cap benchmark:
Percentage of international funds that underperformed their benchmarks
S&P International 700
Percentage of emerging market funds that underperformed their benchmarks
Emerging Markets benchmark:
The SPIVA Scorecard is a robust, widely-referenced research piece conducted and published by S&P DJI that compares actively managed funds against their appropriate benchmarks on a semiannual basis.