Renewed concern over rising inflation stymied stock investors as February closed. Inflation is an essential part of a strong economy. A little understood economic principle is that the economy is largely made up of a combination of government and consumer spending. When consumers have little cash, from widespread unemployment or underemployment, the economy shrinks until increased government spending stimulates consumer spending and healthy inflation. The real fear is stagflation, a stagnant economy with no inflation. We have smart bipartisan leadership in Janet Yellen and Jerome Powell.
Stock prices rose in February, with changes in leading sectors in the new year. Energy led the advance. Small company stocks finally found their legs. Real estate stocks also contributed to February growth. Utility and health care stocks lagged last month and bonds were generally down a little. Tech stocks slowed considerably in February. Market indices averaged 3.3% in February and 1.3% year-to-date.
A string of mild days at the end of February will lull us into thinking spring is just around the corner. Add a field sparrow recently arrived with his beautiful melody. Here’s hoping he is onto something. Despite the odds. Meanwhile the light at the end of the pandemic tunnel brightens.