By: Mike Horwath, CFA®

  • Major market indexes were slightly negative for the week. We saw both global markets (represented by the MSCI All Country World Index) and domestic stocks (represented by the S&P 500 Index) down -0.1%. U.S. small companies and emerging markets both finished the week up 0.4%.
  • Most of the downward volatility came on Tuesday when reports of the Biden Administration considering a substantial increase to the capital gains tax for wealthy taxpayers leaked. The natural concern is that normal long-term investors would consider selling their highly appreciated positions prior to the tax going into effect. This is all premature and we’ll need additional clarity on whether this is being seriously considered before evaluating the consequences.
  • The pandemic is still a serious economic concern, even as data domestically improves. COVID cases have jumped in several countries, with India struggling the most as they reported the world’s largest single-day case count.
  • As Q1 earnings season pushes on, expectations continue to improve for what could be one of the best quarterly earnings growths in a decade. As of Friday, FactSet is reporting an expected 34% increase in corporate earnings for the first quarter. If that comes to fruition, that would be the best year-over-year growth since 2010.
  • The U.S. Federal Reserve will meet for the normal two-day policy meeting on Tuesday and Wednesday. The expectations are they’ll leave rates alone; however, markets have shown to be very responsive to the rhetoric coming out of their meetings.
  • In line with economic data improving, last week’s initial unemployment claims fell to their lowest level since the pandemic began in March 2020. Additionally, we’ll receive our first estimate of U.S. quarterly GDP growth on Thursday with the expectation being a sizable growth rate for the first quarter.
  • I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.

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