Vaccinations Bolster Investor Confidence, Emerging Markets Present Trouble

This week marked the one-year anniversary of the market bottoming during the beginning of the pandemic. Markets dropped over 30% and have since rebounded to new all-time highs earlier in the year. The markets did not move significantly this week, with the Dow and S&P 500 gaining less than 1% as of Thursday while the NASDAQ dropped almost 2% after a rough day on Wednesday. Outside of Wednesday, the NASDAQ did not see much movement.

The change in the market this past week likely represents a healthy rotation as investors adjust their portfolios. As of recent, investors have been moving away from high-growth stocks. This has resulted in the S&P 500 and Dow Jones outperforming the NASDAQ as of recent.

Despite American markets not having significant movement, emerging markets had one of their worst weeks in months. Both emerging market stocks and currencies saw large losses this past week as investors are optimistic about the U.S. economic recovery and its rising dollar. Funds that invest heavily in emerging markets such as Colombia, Brazil, and Argentina are facing the biggest declines of the year, with an average loss of about 10%.

In other news, U.S. junk bonds (high risk and high yield bonds) saw their busiest quarter ever. The main reason behind this is that with the Federal Reserve and international central banks keeping rates so low, many investors have sought after high yield junk bonds to boost their gains

This past Thursday, Joe Biden announced that he wants to administer 200 million vaccines in his first 100 days, doubling his original goal. This has resulted in investors gaining confidence regarding future economic growth.

According to new surveys, Americans are also the most optimistic about the economy and their own financial position since the pandemic began. The much-anticipated stimulus checks have been making their way into the hands of American citizens while COVID-19 cases continue to decline.

Overall, the market had a relatively flat week. Vanguard reported that the market may be slightly overvalued at the moment due to low-quality growth stocks performing so well in recent months. They also expect U.S. inflation to surpass 2% soon, but this may be short-lived. Earnings season is coming up in April, which could significantly affect the market. But with low-interest rates and a slowing pandemic, investors have a positive outlook at the moment.