As investors head into Quarter 2, experts are reminding them to be vigilant with their money. While stocks rose in Q1, giving the market a strong start to 2021, experts predict that the market will undergo a few “exaggerated scares.” While the eyes of the masses may be on the market, they’re also on the status of the global economy. While economic recovery in the United States and China is said to be gaining steam and paving the way for other countries, economists watching other parts of the world say they are getting worried.

 

CNBC/Michael Santoli
The market powers into the second quarter, but investors should be vigilant 

At some point as a market cycle unfolds, the big risk shifts from overthinking the situation to underappreciating the hazards.

It’s not clear we’re there yet: Both the impressive market action and torrent of positive economic news continue to reward the “keep it simple” approach so far in 2021, with higher stock prices, outperformance by cyclical beneficiaries and index pullbacks that are brief and shallow, if a bit more frequent.

If two bedrock rules for staying with market trends are “Don’t fight the Fed” and “Don’t fight the tape,” then investors should be comforted by the lack of provocation by either right now.

The economy is revving hard right now.

The ISM Manufacturing index last week reported a 37-year high of 64.7, auto sales are back to a record annual rate, home price growth is the best in 15 years and 916,000 net new jobs in March took the unemployment rate down to 6% — with Goldman Sachs talking about a move under 4% next year.

And with it all, Federal Reserve officials will continue to insist none of it will prompt a shift away from maximum-easy policy until full employment is here and not projected — and even then, not unless inflation is running above 2% for a while.

This “sweet spot” interlude, when good news does not elicit a policy offset, will not last forever. And the market will probably undergo a few exaggerated scares about it ending before it does. But it isn’t over yet.

The push above the 4,000 mark by the S&P 500 last week extends a remarkably orderly uptrend since late October, the index benefiting from broad upside participation, salutary day-to-day ebb and flow among equity styles and sectors, swelling flows into stock funds and lavishly accommodating credit markets.

Will 2021 be a repeat of 2013 and 2017 — two of the most persistently strong years since the 2008 financial crisis? See what experts are saying, here.

 

CNN Business/Julia Horowitz
The US recovery is speeding up but the global economy isn’t out of danger

The economic recovery in the United States and China is gaining steam, triggering a wave of upgraded forecasts and optimistic commentary. Meanwhile, economists watching other parts of the world are getting worried.

“While the outlook has improved overall, prospects are diverging dangerously not only within nations but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two engines — the US and China,” Kristalina Georgieva, the managing director of the International Monetary Fund, said in remarks last week.

Her comments set the tone for a week of virtual meetings at the IMF and the World Bank, where the pace of the COVID-19 recovery will take center stage. Finance ministers from top economies are also set to convene this week at a meeting hosted by Italy.

Georgieva hailed “good news” for the global economy thanks to vaccinations and additional stimulus spending in the United States. She indicated that the IMF will upgrade its global economic forecast on Tuesday. The group last predicted that global growth would hit 5.5% in 2021.

Recent economic data from the United States supports a rosier view. US employers added 916,000 jobs in March, the Labor Department reported Friday. That’s the biggest gain since August and trounced expectations. Investors will get their first chance to react to the report on Monday.

“An American economy about to regain its swagger after a year of pandemic-induced crisis was on full display in the March jobs report,” Joseph Brusuelas, chief economist at RSM US, said in a note to clients.

The job market is still in a hole, with the country down 8.4 million positions since February 2020. But industries that have been hit hard are showing signs of resilience. Restaurants and bars added 176,000 jobs last month, while state and local education jobs rose by 126,000 as schools started to reopen. Delivery services such as FedEx and UPS, which have benefited from the huge increase in online shopping, added another 17,000 jobs.

Read the full story, here.

 

Reuters/Hideyuki Sano
Stocks gain after bumper U.S. jobs data, bonds smell Fed trouble

Global stock prices rose to a 1 1/2-month high on Monday after data showed a surge in U.S. employment while U.S. bonds came under pressure on worries the Federal Reserve may bump up interest rates sooner than it has indicated.

U.S. S&P500 futures traded 0.3% higher, maintaining most of their gains made during a truncated session on Friday though tech-heavy Nasdaq futures lagged behind, trading almost flat.

In Asia, Japan’s Nikkei rose 0.8% while MSCI’s broadest index of Asia-Pacific shares outside Japan slipped slightly, with China closed for Tomb-Sweeping day and Australia on Easter Monday.

MSCI’s all-country world index was almost flat but stood near its highest level since late February and within sight of a record high set that month, though trade remains slow, with much of Europe on holiday.

The U.S. labour department said on Friday that nonfarm payrolls surged by 916,000 jobs last month, the biggest gain since last August.

That was well above economists’ median forecast of 647,000 and was closer to markets’ whisper number of one million. Data for February was also revised higher to show 468,000 jobs created instead of the previously reported 379,000.

“There will be further improvements in April, as restaurants have started to reopen. People have expected economic normalisation to take place sooner or later but its pace seems to be accelerating,” said Koichi Fujishiro, senior economist at Dai-ichi Life Research.

Although employment remains 8.4 million jobs below its peak in February 2020, an accelerating recovery raised hopes that all the jobs lost during the pandemic could be recouped by the end of next year.

The prospect of a return to a full employment, in turn, is raising questions about whether the Fed can stick to its pledge that it will keep interest rates through 2023.

Read the full story, here.

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