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Wow! Look at those returns!

Wow! Look at those returns!

April 15, 2021
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I hope this email finds you all well. As always, please let me know if you would like to schedule a time to review your portfolio or discuss any financial matters.  Please see a quarterly letter below.

First Quarter Market Update 2021  

It’s been a strange year, to say the least.  Given that, I hope you will reserve judgement when I say that the most fun I’ve had in a while has been looking at the “year over year” returns for this quarter that just ended.  These are the returns looking backward to this point in time, one year ago – March 2020.   

That date, March 2020, will no doubt live in all of our minds alongside 9/11, Pearl Harbor and the Kennedy assassination – events that shook our society to its core.  The Pandemic had set in and we are just now passing the one year mark for lockdowns and day to day life changing as abruptly as it ever has for most of us.  The Markets on the other hand, had begun their realization of what was to come about a month prior, in February 2020.  As the Markets are wont to do, they were forecasting.  Thinking ahead.  The Market marked its low on March 23rd and began what we now see, in the rearview mirror, was the most ferocious recovery.    

All of this means that, as of quarter end one year ago, the Markets were very near their dramatic low brought on by Covid.  Fast forward to the end of this quarter, a year later – where we see the acceleration in returns off of a significant low caused by a global pandemic – and we see one year returns that are FANTASTIC!    

Everyone’s portfolio is unique.  The mix of managers, the mix of stocks versus bonds as well as contributions and withdrawals all impact returns but by and large, portfolios with exposure to stocks have done very well in the last twelve-month period.   

We heard quite a bit last year about how the big tech companies had contributed so disproportionately to returns.  Other sectors finally joined the party late last year as did other countries and regions.  The recovery has broadened and continued through this past quarter.   

As always, we ask: What does this mean for our portfolios? 

We mentioned that Markets are always forecasting – most estimate that they are trying to look about twelve months down the road to see how the economy will be faring and what that would mean for corporate profits; this is always where the rubber meets the road.   


There is plenty of chatter about 2022 and moving beyond the recovery phase we are currently believed to be in.  While there are always concerns on the horizon – inflation and rising rates, higher taxes to name a few – the current trajectory is generally quite positive.  There are sectors of the economy that may never recover to pre-Pandemic levels and but others that have flourished.  That said, we are now in a period of concern over shortages – and we don’t mean toilet paper at Target – we mean of building supplies, dog food, appliances and ketchup (!) among other items.  There have been backups at the ports of Long Beach and Oakland with pictures of container ships milling about in the Pacific, waiting to be offloaded.  There have been shifts in manufacturing – the ketchup industry had to shift to satisfy grocery store demand when we were all forced to eat burgers at home instead of in restaurants last year – and is now struggling to meet restaurant demand which is once again increasing.   

Increasing demand (and certainly shortages) generally lead to price increases.  Price increases equate to inflation.  Inflation causes interest rates to rise.  Depending on the starting point, sometimes rising rates are upsetting to Markets, other times it is simply indicative of an economy that is beginning to stand on its own two feet again.  While the Markets experienced a few days of volatility as we saw the 10 year Treasury yield move above 1.5%1 in March, things ultimately settled down as it became clear that we are looking at the latter scenario – a recovering economy.   

If there’s one thing we know about investing (among other things!), certainly a lesson re-learned in the last year plus, is that we should enjoy the sun shinning on our backs while we can!   

 

Spring has sprung here.  I hope that you are all enjoying sunny weather and good health as well. 

 

  

Data and rates used were indicative of market conditions as of the date shown. Opinions, estimates, forecasts and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. Past performance is not a guarantee of future results. 2021-119506 Exp 04/22 1Market Q, NetX360