Major stock market indices were up again in April as investors balanced strong U.S. economic data against the risks from challenging Covid-19 outcomes in other areas of the world. The equity gains were broad based as large cap (S&P 500 +5.3% and Nasdaq +5.4%) continued to make up ground against small caps (Russell 2000 +2.1%) for the second straight month. Sector level performance remained more uniform in April as every sector had positive returns. Foreign equity markets lagged a bit as the MSCI EAFE index was +3.1% while the MSCI Emerging Markets was +2.5%. Oil prices resumed their upward trend as the benchmark WTI spot futures contract was +6.7% in April and is now +28.9% YTD.
After a historically poor 1Q, bond markets recovered in April as the Bloomberg Barclays U.S. Aggregate index was +0.79% for the month and is now -2.61% YTD. U.S. Treasury yields decreased as much as -14 basis points and the curve bull flattened. Investment grade corporate credit spreads narrowed -3 bps and outperformed duration matched Treasuries by +13 bps. High Yield continued to outperform (+1.09% total return in April) aided by the risk on tone in financial markets.
U.S. economic data released in April came in well above expectations and accelerated nicely from the depressed levels of February. Job gains of +916,000 were reported to have occurred in March. The unemployment rate ticked down from 6.2% to 6.0% but the U.S. remains nearly 9 million jobs short of pre-pandemic levels. The April report of Retail Sales showed a significant monthly increase of +9.8% occurred in March. Strength was broad based as even restaurants saw a +13.4% increase as vaccination rates have help loosen restrictions and has given consumers more confidence. The initial estimate for 1Q growth came in at a +6.4% annualized seasonally adjusted growth rate. Consumer spending (+10.7%) was the major means of growth and sales of consumer goods grew at a rate of +23.6% while consumer services “only” grew at a rate of +4.6%. This portends well for continued strength as the economy re-opens and will likely set off a surge in consumer spending on services.
Sources: Bloomberg, Bloomberg Barclays
Image courtesy of Jorge de la Torriente
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