Market Recap - Week Ending 3.26.21

Overview:  Stocks across the globe were mixed last week, with international equities negative while stimulus-driven optimism in the US markets helped propel stocks higher. The S&P 500 Index was up 1.6% for the week, as interest rates stabilized and the economy continues to show signs of recovery. U.S. jobless claims fell  to 684,000 for the past week, the lowest level since the pandemic began, as restrictions begin to ease across the country.  Meanwhile, 10-year Treasury yields stabilized, ending the week at 1.66%.  Markets were reassured by joint testimony between Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen who both reiterated monetary and fiscal commitment to the economic recovery.  The Fed continues to keep a close key on inflation, and their key metric, increased by 1.4% year-over-year in February, well below their 2% target. 

A Note on Stimulus (from JP Morgan):  The U.S. government, under both the Trump and Biden Administrations, has provided unprecedented fiscal stimulus to help Americans weather the economic disruption from the coronavirus pandemic. However, the recent $1.9 trillion stimulus package has also clearly been aimed at addressing inequality by allocating billions in stimulus checks to lower- and middle-income households, expanding unemployment relief and directing tax credits to families with children. These large-scale fiscal transfers have the potential to boost demand more than a package of equal size, which was more directed at the rich since lower- and middle-income consumers spend, rather than save, a greater portion of their income. In 2019, the top 10% of households spent only 65% of their income, saving the rest, while the bottom 90% spent essentially all of their income. Moreover, while the top 10% devoted just 20% of the dollars they did spend to goods, this percentage rose to 37% for the bottom 90%. As America imports a far greater share of the goods it consumes compared to services, fiscal stimulus aimed at the lower 90% of households also has the potential to boost imports. In short, the remarkable income distribution of the American rescue plan should make it particularly potent in hastening an economic recovery but also in leading to higher inflation and worsening our trade deficit.

Market Returns and Data:

Sources: JP Morgan Asset Management, Goldman Sachs Asset Management

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