April was an overall good month for equities. Most all of the major markets were up across the board.
Q1 earnings started coming in the last couple of weeks of the month, and they have been even better than the already high expectations, pushing stocks higher.
Value stocks have significantly outperformed YTD, but Growth stocks found their footing, at least temporarily, advancing over 8% in April while Value was up roughly 3.1%.
Technology, Financials, Communication Services, Real Estate were all up over 6%, and Consumer Discretionary was up 8.5%. Energy was the only sector down for the month.
Why It Could Keep Going Higher
- There are still 9 million Americans that remain unemployed.
- Consumers have loads of excess savings to spend.
- Business have a lot of inventory to build back up.
- Continued vaccine rollout.
- Additional stimulus
- We just received our first glimpse at GDP for Q1, and the data points to an expansion of 6.4%, beating expectations of a 6.1% annualized rate.
- Biden unveiled his almost $4 trillion stimulus/infrastructure plan including specific tax increases to help pay for it.
- The Fed maintained their optimistic outlook yet remain very accommodative in their monetary policy.
- Retail sales in March jumped almost 10%
- Home sale data continued to remain strong.
What We Are Doing
We have continued to maintain a well-diversified allocation, yet overweighting equities and underweighting bonds. We’re still investing in areas that should benefit from the world returning to normal, as well as potentially higher interest rates, such as industrials, banks and value. However, we believe longer term trends will continue to favor technology that we added to during their recent sell off.
We continue to be light on developed international equity exposure, as Europe seems to be trailing the US with its vaccination progress. Although we don’t believe interest rates will rise at the same rate it has over the past couple of months, they will likely continue to rise over the coming years. As a result, we decreased our exposure to investment grade fixed income and moved some to high yield and some to cash. Going forward we continue to favor high yield, preferred stocks, private debt and private real estate as a way to create income.