After performing well the past several weeks, stocks took a bit of a breather this week. Some of this easing in sentiment had to do with mixed corporate earnings. However, the greater concern weighing on investors was a renewed surge in COVID-19 cases around the globe.
The U.S. continues to make progress with the Centers for Disease Control and Prevention (CDC) reporting this week that half of American adults have received at least one COVID-19 vaccine dose. Despite improvements in the U.S., things are looking less rosy in other nations as the number of new worldwide cases topped 5.2 million this past week. Heavily populated countries such as India continue to battle the spread of the virus, while Japan is considering moving to a state of emergency. The subsequent market impact cooled off sectors such as energy and industrials, which had been benefiting from hopes of a reopening and reflating of the economy.
While stocks in more economically sensitive areas of the market struggled this week, so did some whose businesses benefited from many shelter-in-place trends that were prominent throughout much of the pandemic. Video streaming companies, for example, saw a big surge in subscriber growth in 2020 as consumers sought ways to entertain themselves within their homes. However, as we fast forward to the present, these same streaming companies have not been able to add new subscribers at the same pace as last year, thus earnings disappointments are beginning to rear their ugly heads.
Finally, after struggling in the first quarter of 2021, the bond market has come back to life in April. Earlier in the year, the yields on longer-term Treasuries – which move inversely to their price – spiked on hopes of renewed economic growth and fears of inflation. Now, a few weeks into April, inflation fears appear to have calmed down. Thus, bonds have performed well and played their portfolio ballast role this week as stocks struggled to gain their footing.
Be safe and be well.
Market comments are based on the S&P 500 index which is unmanaged and cannot be directly invested into. Past performance is no guarantee of future results.
Investing involves risk and the potential to lose principal.
Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed.