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Week of March 1, 2021 Thumbnail

Week of March 1, 2021

Greetings,

We hope this weekly update finds you safe and well.

  • Last week's price action was again driven by interest rate concerns, with the ten year treasury yield rising to 1.50%.  Tech stocks were down by almost 5% for the week, as this basket of stocks is typically more sensitive to moves in interest rates.   Our take is the we may very well see a counterintuitive market sell-off with the passing of the latest stimulus bill.   The markets appear to be more concerned with overstimulutive measures taking control of the bond market away from the Federal Reserve and into the hands of the bond vigilantes.   
  • Too much stimulus?  GDP estimates are currently running at over 5% growth without even factoring in the new stimulus.    If growth runs too hot the Fed has the tools to reign in the long end of the curve--we are reminded of when they implemented the twist in 2013 to bring down the ten year rates and get mortgage rates back in line. 
  • The Fed is determined to let inflation run hotter than they normally would and again last week committed to keeping rates low for an indefinite time-- perhaps good for the markets but there will likely be a tug of war between bond investors and the Fed over control of the long end of the curve, and this will of course create great volatility. 
  • Its been a long time:  The worst total return  year for bonds in the last ten years occurred in 1994, when the taxable bond market suffered a loss of 2.9% for the year.    

Our full recap of last week's events is linked.  Please do not hesitate to contact us to discuss your portfolio and financial plan, or just to catch up.

John J Klobusicky, CFA,CAIA, Managing Partner


Market Insights - February 26, 2021 

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