Fun Facts about April
- Birthstone: Diamond
- Flower: Daisy and the sweet pea
- Zodiac signs: Aries and Taurus
- April 1 is All Fools’ Day—otherwise known as “April Fools’ Day.”
- In the Southern Hemisphere, April is the same as October in the Northern Hemisphere.
- The Boston Marathon is held during April.
- In Ancient Rome the month of April was sacred to the goddess Venus.
- In England, there are many cuckoo festivals. The arrival of the cuckoo bird in April is a signal that spring has arrived.
Stocks continued their climb for the second month in a row. The S&P 500 rose over 4% in March and is now up 5.8% for the year, not too shabby. With that said, there are signs of a changing of the guard in the stock market leaders. The big tech companies that benefited from the stay-at-home rules of the pandemic are now not so hot and are giving way to the downtrodden air travel, leisure, and entertainment sectors. In fact, many of the stock prices of companies in these industries have already factored in a fully open economy so be careful if you are looking to invest in one of these areas.
The markets have been getting pushed and pulled, most recently, by rapidly changing interest rates, good and bad news on the pandemic front, and favorable reports of the economy getting back on track.
Regarding the pandemic, in last month’s update, I said that we were close to 2 million doses per day. We are now at 3 million per day. We’re also seeing an increase in the number of new cases as well, due to more contagious variants as well as reduced restrictions by states and local municipalities. But overall, there is light at the end of the tunnel. Thanks again to everyone from the researchers to the needle makers to the frontline workers stabbing us!
There is another big market catalyst coming in the form of a monster infrastructure bill that the White House is laying out this week. I’ll touch on this and the other market forces mentioned above in more detail below.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices dropped across the board once again as worries of inflation increased among investors. This was expected and may continue for a while as the world starts to reopen. March was the fourth month in a row for falling prices. Not a good sign for holders of bonds with long maturities. If you are a bond buyer and this trend continues, try and keep your bond maturities short, no more than 2 years, to reign in some of the risk in your portfolio.
The 10-year US Treasury note is now yielding 1.72% and the 30-year bond is at 2.42%, both much higher from last month. These rates rising could become a problem if the 10 year gets close to 3% and/or the 30 year gets near 5%. For now, the best option is still high-quality stocks that pay dividends. These rates should be monitored closely if you’re concerned about a market selloff in stocks (who isn’t?).
Interest rates, as expected, rose once again as the goal of reaching herd immunity becomes more realistic. Rates are still very low, but they seemed to have bottomed out and are marching onward and upward.
On the savings side, most rates moved slightly down even though bond rates went sharply higher.
Currently, the average savings account is paying 0.29%, slightly higher than last month. This rate is still incredibly low and not the best place to park all of your money.
The 1-year CD interest rate is now averaging 0.49%, lower than the 0.52% it was yielding a month ago. The 5-year CD rate is lower as well, currently at 0.68%.
Mortgage rates moved higher once again in March, but still continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 3.25%, a bit higher than it was last month (3.14%). Demand remains very strong for homes as inventories continue to diminish. Material prices to build new homes are much higher than this time last year. For instance, lumber prices are 234% higher than last April and copper prices have almost doubled in the same time period. It is still a seller’s market in the housing sector as these low rates, high material costs, and low inventory are keeping housing prices high.
Oil prices simmered down a little in March after a big runup to start the year off. The price for a barrel of oil in the U.S. dropped about 2% to $60.44. This broke a 4-month string of higher prices. I’m surprised prices didn’t keep moving up, especially after that big ship tried to pull a U-turn in the middle of the Suez Canal.
Demand should continue to pick up as travel increases and the economy recovers from the pandemic shutdown. This will put a floor under oil and gas prices until we get back to normal.
Gasoline prices moved higher once again in March. Prices at the pump are averaging about $2.87 per gallon, about 15 cents higher than a month ago. Mississippi has the cheapest fuel again, at $2.59. California, which will never win the cheapest fuel award, is approaching $4 a gallon ($3.90). FYI, a year ago, we were paying $2.00.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Infrastructure Bill: The Covid relief was put into law and the stimulus checks have been hitting bank accounts for the past few weeks. Now Biden and his team are going to try and sell a huge infrastructure plan to the American people and Congress. I’ll talk about this more over the next month since the final version will most likely be very different than what is currently being proposed. Regardless, this will be a net positive for stocks.
- Coronavirus: We continue to corral this virus with shots in the arm coming in at 3 million per day now. Over 28% of the country has received at least one dose. Good stuff. Also, a majority of states are now allowing any adult to get the vaccine. However, there is still a lack of supply in many regions. I know here in Charleston, SC, it is still pretty tough to get an appointment. The good news is that there are more and more vaccine shipments everyday so the supply issue could be resolved sooner than later. I’m ready to remove this event off of the Outlook section.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
