One year after the 2020 stock market low, we look back and share observations and takeaways for your portfolio strategy.
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Both the S&P 500 Index and the Dow Jones Industrial Average finished higher this week after rising during Thursday and Friday trading. Even with its own upward move on Friday, the tech-focused NASDAQ Composite could not overcome losses from earlier in the week. The rotation in market leadership from technology stocks that flourished during the pandemic toward cyclical and value stocks appear to be gaining momentum as the vaccination effort progresses. The massive cargo ship “Ever Given” ran aground in the Suez Canal, grinding to a halt a sizeable percentage of the world’s global trade – likely leading to temporary price and supply distortions in numerous markets.
For the week, the S&P 500 Index finished up 1.2%, and the Dow Jones Industrial Average also rose 1.2%. Year to date, the S&P is up 7.4%; the Dow has gained 9.4%. First-time unemployment claims fell more than expected to 684,000, their lowest point since March 2020. Continuing claims also fell significantly to 3.9 million. Consumer spending and personal income both fell in the U.S. in February, although extenuating circumstances contributed to those reductions. The recent severe cold weather in southern states likely depressed spending, and personal income returned to trend in February after January’s temporary boost from pandemic stimulus payments.
Twelve months ago this week, U.S. stocks reached their lowest point of the pandemic. It is remarkable how quickly and strongly markets rebounded from the chaos of last March. At that time, we believed strongly that the economy and stocks would recover, and we counseled against making rash decisions that had the potential to affect clients’ long-term financial health. In retrospect, that was a prudent path – even if we were slightly surprised at the speed and magnitude of the reversal! With coronavirus vaccinations increasing at a more rapid pace in the U.S., and with more businesses returning to pre-pandemic levels of activity, our expectation continues to be that recovery will accelerate through 2021.
The pandemic reinforced for us the validity of our core investment philosophy: commitments to asset allocation, global diversification, cost sensitivity, and marrying investment policy with a financial plan. These tenets continue to serve as the foundation upon which we construct portfolios to help you meet your goals.
Tax planning is another important area to focus on as you pursue financial goals. Please check out our 2021 tax guide to review useful information on tax rates, deductions, credits and deadlines. As always, please contact us with any questions around tax strategies and your financial plan. We are here for you every step of the way.