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.
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