Another month of strong gains in the stock markets closed the 1st quarter of 2021 even higher. The S&P and Dow Industrial stock indices averaged 4.3% for the month and 7.5% for the quarter. The stock market has returned very strongly as we struggled with the pandemic over the past year. The market sectors contributing to this month’s growth include health care, utilities, and real estate. Bonds were slightly positive for the month with municipal bonds returning better.
Concerns continue about the effect of government deficit spending triggering runaway inflation. While spending correlates with inflation, the Federal Reserve and Treasury are monitoring this closely. There was a comparable situation of U.S. government deficit spending and an expanding economy at the end of WWII. This caused a spike of inflation that dropped almost as quickly as it rose. The Feds have tools in their kit that they applied in 2011-12 to ease short term yield shock pain. It is good to remember that fear of inflation is not inflation.
March came in like a lion and went out like a lamb, following prediction. A time of transition, fluctuating, while gradually moving forward into a season of hope. Signs of an early spring beckon worldwide, from cherry blossoms in Japan to daffodils blooming in New England. It may take a while for us to shed the fears and apprehensions we have cloaked around us this long pandemic season. Stepping into the light is not always easy, even as it holds all the familiar that we have dearly missed.