Market Flash Report | April 2021

Economic Highlights

United States

• The U.S. economy surged higher during Q1 with 6.4% GDP growth. This was slightly below expectations, but up from Q4’s 4.3%  growth. Consumers, who account for 68.2% of the economy, accelerated spending by 10.7% in Q1 compared with a 2.3% increase  in the previous period. Business spending picked up in Q1, but trade and inventories were a drag on growth.
• After hitting record highs in March, the ISM Manufacturing PMI and Services PMI softened a bit. They both remain at very strong  levels (above 60) , suggesting that the economic boom across the country will continue. New orders and production weakened  a bit across manufacturing and services, but a real concern has been the spike in prices, suggesting inflation is on the horizon.
• Inflation expectations continue to surge across the U.S. with breakeven rates trending higher over all time periods. Inflation will  naturally rise due to low Y/Y comparisons, but the Fed expects the impact to be transitory. We do not expect to see runaway  inflation any time soon, but some closely watched data points suggest there is risk to the upside. The rise in interest rates has  been for the right reasons of stronger growth and higher inflation. 

Non-U.S. Developed

• The euro zone economy contracted in Q1 2021 as countries implemented new lockdowns and restrictions amid a third wave of  coronavirus infections. GDP fell 0.6% Q/Q with weakness in Germany, Italy, Spain and Portugal. France bucked the trend with  surprise growth of 0.4%. The Q1 weakness was largely expected with the eurozone’s botched vaccine rollout, but recent data  suggest a strong rebound in Q2.
• The eurozone composite PMI moved higher in April, boosted by a pickup in activity across manufacturing and services.  April’s
  reading of 53.8 was up from 53.2 in March. Activity picked up in Spain and France while it slowed slightly in Germany and Italy.
• The U.K. economy should see a strong bounce in Q1 and 2021 as the country has done a nice job vaccinating its population and  reopening its economy. Economists have been revising 2021 U.K. GDP growth expectations higher to current levels of 6.5-7%. 

Emerging Markets

• The Chinese economy grew at an annualized rate of 18.3% during Q1 2021. That was slightly below expectations and growth  slowed a bit Q/Q. Industrial production missed expectations last month while retail sales came in better than expected at +34%.
• We believe the EM growth story is still in tact, but the timing of the economic and earnings recovery in certain countries is still  unknown. Two of the larger EM countries, India and Brazil, are in the midst of a crisis dealing with COVID. The rollout of  vaccines has also been slower across EMs, potentially delaying the reopening of certain economies.
• Asia has largely weathered the storm in terms of COVID so we expect those countries to drive EM growth in 2021. China  represents a huge part of the benchmark so EM performance will largely be driven by Chinese stock performance. Taiwan, Korea, Indonesia, Thailand and India are other big components of EM Asia. 

Sector Performance

S&P 500 (as of April 30, 2021)

Russell 2000 (as of April 30, 2021)

MSCI EAFE (as of April 30, 2021)

MSCI EM (as of April 30, 2021)