2021 First Quarter Market Review

By Michael Carlisle, Vice President & Trust Officer; Investment Committee Chair

As we pass the one-year anniversary of the onset of the Covid-19 pandemic and economic lockdown, it seems appropriate to reflect on our current economic and market scenarios and how they may play out for the balance of the year.  

The U.S. seems poised for economic growth as we emerge out of the pandemic, assuming no substantive setbacks in vaccine distribution. Vaccinations will dictate the path toward herd immunity, which will drive the pace of economic growth. We anticipate above average U.S. GDP growth, particularly given recent massive stimulus and continued easy Fed policy.

The Federal Reserve has made it clear that its policy rate is on hold at least through 2022—in line with most central banks around the world. The Fed policy has and will continue to be supportive of asset prices. Inflation may bump up temporarily, and the recent uptick in interest rates reflects the effect of current monetary policy and recent fiscal stimulus.  

Europe anticipates a decline in GDP due to the slow rollout of vaccine distribution, the emergence of mutant strains of Covid-19, and the possibility of double-dip recession. Emerging markets and China are poised for GDP growth approaching pre-pandemic levels for the balance of 2021.  

A year ago, under the pressure of a pandemic-induced sell-off in US equity markets of 34% in five weeks, the most difficult move was the most profitable, as the markets served up a hard-to-accept invitation to shift money from bonds into stocks.

Sticking with investment goals and taking what the market offered, we executed multiple rebalancing trades inside our traditional balanced portfolios to take advantage of a strong recovery in asset prices.  

This willingness to realign portfolios when market conditions warrant is a long-standing core value of our company and investment process. It has proven successful in preserving client portfolio values in support of their long-term goals.    

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