After two rallies earlier in the quarter fizzled, the market found the energy to muster one more. The result was a record high for the S&P 500 ending just short of the 4,000 market. It was driven largely by investor optimism and some data points suggesting the economy is on track to reopen as expected. Below is a quick overview of what happened.
- Every S&P 500 sector participated in the rally with the Energy sector (30.8%) leading the way and the Consumer Staples sector (1.8%) struggling for traction.
- In general, what led the current year rally was the opposite of what led the rally last year. However, a rotation trade may have begun in the second half of March as Consumer Staples was one of the strongest performers during that period. Additionally, the Russell 2000 which has been rallying since Q4 of 2020 showed weakness in the second half of March as well as the S&P 500 Equalweighted index.
- Internationally, it was European ETFs leading the market higher for the quarter, followed by developed country indexes and then emerging market indexes. Canada posted some of the strongest international results. Notably, Brazil is struggling mightily with COVID-19 causing a drag on Latin American indexes.
- The rally in bond yields posed headwinds for fixed income securities. Short to intermediate duration bonds were impacted the least, while 20+ year Treasuries experienced double-digit declines.
- Recent March economic data suggests US manufacturing firms are blowing away forecasts for growth and the data is strong internationally as well.
The US market is in a good place as it enters the second quarter and there is reason for optimism as the economy reopens.
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