Investment Review - April 2021
- March saw five new closing highs for the market, while the S&P 500 nearly topped 4,000. Stock indexes posted gains across the board for March and the first quarter is off to a fast start; the S&P 500 rose 4.24% and the Dow Jones Industrial Average gained 6.62%, while the Nasdaq Composite rose 0.50%.
- The 10 year US Treasury bond rate rose 0.83% during the first quarter of 2021, the largest move since 2016. Low rates have been a driver of positive returns for certain segments of the stock market, as seen in the Nasdaq results last month and year to date. Market participants remain at a pause as they decide if many of last year’s boom companies can grow into their valuations.
- Over the past few years interest rates have been fairly even across various maturities, otherwise known as a “flat yield curve.” One of the most widely used measures compares the difference between US Treasuries’ 2-year yield and the 10-year yield, or the 2’s-10’s spread. This differential moved sharply in the first quarter, by 0.79% of additional yield for a 10-year bond versus a 2-year note, the largest such move since 2008 and the early 1980’s, prior to now. This is an indication that the bond market expects a strong economy, which will support rising rates, after the pandemic dropped yields back to their prior floor.
Sources: Bloomberg LLC, FactSet, U.S. Department of Labor
Disclosure: This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.
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