Stuck in a Rut? Optimism is on the way!

As we near the end of the first quarter, the markets and economy have been in a bit of a funk. February saw a number of disappointing economic numbers come in, with retail sales, durable goods orders, and new home sales all weaker than expected. Although these numbers were certainly less than stellar, we do not believe this rut will lead to a more prolonged decline.

With spring weather arriving and parts of the U.S. economy continuing to reopen, we anticipate the economic recovery and financial markets will get back on track. The fact of the matter is the U.S. is leading the global economic recovery. We believe this trend will continue.

According to DataTrek, the U.S. markets—particularly small companies—have been leading the charge forward:

U.S Markets (1-year returns)

• S&P 500 (large caps): +51.1%
• Russell 2000 (small caps): +88.2%

Non-U.S. Markets (1-year returns)

• MSCI EAFE (non-US developed economies): +40.8%
• MSCI Emerging Markets: +50.7%
• MSCI Japan: +39.6%
• MSCI Germany: +51.1%
• MSCI France: +41.4%
• MSCI Italy: +45.6%
• MSCI UK: +30.1%
• MSCI China: +38.4%
• MSCI South Korea: +86.3%
• MSCI Taiwan: +74.0%
• MSCI India: +68.3%
• MSCI Brazil: +23.8%

The Atlanta Fed recently increased its first-quarter GDP estimate to a 5.4% annualized growth, but this number could get even better as the recent stimulus package makes its way into consumers’ pockets. This stimulus should help fuel higher retail sales numbers for March and April. Additionally, the Biden administration is set to unveil new infrastructure and green energy stimulus that could give the economy a further boost.

As warmer temperatures come along, it also tends to lead to a more optimistic mood for investors. Spring is one of the most beautiful times of year. It is a time of renewal and a time where we can step back and focus on the resurrection of Christ at Easter.

“For behold, the winter is past; the rain is over and gone. The flowers appear on the earth, the time of singing has come, and the voice of the turtledove is heard in our land.” – Song of Solomon 2:11-12

Even though retail sales were down 3% in February, consumer confidence increased from 88.9 to 91.3 according to the Conference Board. More confident consumers and stimulus money on the way should lead to healthy spending gains in the months ahead. Overall, retail sales are still in an upward trend, increasing by 6% over the past three months—a very healthy sign for future gains (70% of our GDP is based on consumer spending).

Additionally, U.S. manufacturing is still booming. Over the past year, durable goods orders are up over 3.2%. Despite a 1.1% decline in February, the trend is still quite favorable.  Real estate is also an area of growth. There has been strong demand across the country, with a new wave of homebuyers for new and existing homes. New home prices are up 8.2% year-over-year.

So, despite the rut in February, the U.S. economy is still doing great over the past year! As we enter the spring, optimism and momentum should continue to propel the U.S. This should help us to remain a leader in the global economic recovery.

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

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