May, 2021
Leveraging Technology
Never satisfied with the status-quo, we are hard at work behind the scenes to leverage the latest technology to enhance our planning expertise and your experience with GTS Financial.
We've added technology that allows us to manage 401(k) accounts directly, analyze Social Security claiming strategies, analyze your tax situation, and provide access to high-yield savings accounts. Let us know if you'd like to learn more about any one of these innovative offerings.
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In addition to the technology mentioned above, we'll be rolling out access to a cutting-edge portal where you will be able to see your net worth, link all of your financial accounts for easy monitoring, track your budget, and view your portfolio. More information will be coming soon on this portal, but in the meantime watch the video below for a "sneak-peek".
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Seeking Direction
Though the S&P 500 and Nasdaq established new record highs at the start of last week, stocks struggled to find traction as the week wore on.1
Investor sentiment was dampened by rising COVID-19 infections in India and Japan, along with mounting inflation worries. Stocks finally caught some lift from strong quarterly reports issued by two big technology companies and an upbeat first-quarter Gross Domestic Product growth number, sending the S&P 500 to a fresh record high.2
Once again, though, stocks failed to follow through, as the market retreated in the final day of trading to close near where it began the week.
Earnings Top Expectations
Last week was the biggest week of the first quarter's earnings season with a third of S&P 500 companies reporting, including six of the largest companies.3
With expectations high, businesses generally topped Wall Street analysts' estimates; Big Tech companies posted especially noteworthy earnings. Coming into last Friday, with 40% of S&P 500 index companies reporting, earnings-per-share growth (EPS) is now estimated to be 29.3%, well ahead of the 12.2% EPS growth rate that analysts had expected at the start of the year.4
"Green Shoots" in the Economy
Investors looking for "green shoots" to confirm that the economy is on the mend have seen plenty of examples in recent weeks.
Retail sales rose 9.8% in March, the largest monthly gain since May 2020. It's important to remember that purchases at stores, restaurants, and online are among the biggest drivers of overall economic activity. The gain coincides with the government distributing hundreds of billions of dollars in stimulus funds to households.5
New jobless claims came in at 576,000 for the week ended April 10—the lowest level since March 14, 2020, and continuing unemployment claims were at their lowest four-week moving average since March 28, 2020.6
Housing starts rose 19.4% to 1.7 million units in March, the highest level since June 2006.7
Green shoots is a term used to indicate signs of economic recovery after a downturn. It's a reference to when plants start to show signs of life again. Most recently, former Fed Chair Ben Bernanke used the metaphor to describe the economic recovery following the 2007-2008 financial crisis.8
There is no doubt the economy may face several challenges in the months ahead. Interest rates, taxes, and inflation are three issues that may take over the headlines at any time.9
Stock Market and Higher Interest Rates
Speaking of interest rates, the Federal Reserve ("Fed") has decided to keep the target range for the federal funds rate at 0 to 0.25 percent. The Fed expects to maintain that range until labor market conditions are consistent with their assessments of maximum employment and inflation has risen to and exceeds 2 percent.10
When rates do begin to rise, not all rates are created equal. Historically speaking, higher long-term interest rates have been good for stocks. The Fed raising short-term rates, however, has been more problematic.
You'll see in the chart below the impact rising long-term rates and the Fed raising short-term rates has had on the stock market in the past.
Of course, what has happened in the past is no guarantee of what will happen in the future. If you'd like to discuss anything related to the markets, economy, or anything else for that matter, we're here to help.