Vaccines and Stimulus

February 26, 2021

February is historically the only month of the year with a net gain/loss of 0. January got off to a strong start but ended with a slide into negative territory and we wondered if that would spill over into February. We were surprised to see the month began with the best weekly rally since November, gaining ground each of the first 6 trading days. After hitting multiple new all-time highs, the S&P 500 moved sideways for most of the month before selling off at months end. The interest rate on the 10-year Treasury has risen 50% since the first of the year, which is not unexpected in an economic recovery, but the speed of the increase is causing some concern. At the end of the month the S&P 500 had gained 2.6% and is now 1.5% higher for the year. Oil prices were in focus in February, rising 18% during the month despite a $2 decline on the last trading day.

The first week of the month saw multiple new all-time highs as the S&P 500 gained ground every day. The Reddit related speculation that rattled the market in late January died down and economic numbers during the week were encouraging. In addition, it became more likely we are going to get more stimulus out of Washington and the pace of vaccinations was increasing. New claims for jobless benefits during the week were the lowest in 2 months and the number of new COVID cases declined sharply. At the end of the week the S&P 500 had gained 4.7%. Bitcoin grabbed the headlines in the second week, jumping 15% after Tesla said they had purchased $1.5B of the cryptocurrency and would accept it as payment for services. Mastercard said they are working on a Bitcoin credit card and other businesses appeared ready to give the commodity more credibility. The week ended with some selling, but still closed with a gain of 1.2%. Technology stocks have led the rally off the March 2020 low but came under selling pressure during the holiday shortened 3rd week of the month. The selling was related to concerns about the Congressional hearings featuring large cap tech companies and concerns about what might be done to them. These companies were generally big supporters of the Biden campaign, so we believe a slap on the wrist is the most likely outcome. We learned retail in January were much better than expected, but the selling in tech stocks weighed on the market. At the end of the week the S&P 500 had lost .7%. The last week of the month saw selling in technology names escalate as interest rates moved to the highest level in over a year. The 30 stock Dow held up better than technology, but the unrelenting selling sent the S&P 500 down 1.8%, its worst week since October.

March has traditionally been a very average month with a net gain of .6% and a higher close 60% of the time. From time to time the market will focus on one thing to the exclusion of everything else, right now that is interest rates. The rate on the 10-year Treasury is expected to level out around 1.5%. If that happens, additional stimulus and the pace of vaccinations should help the market move higher. If rates should move through the 1.5% level and towards 2% it will likely be a problem for the market. We believe the stimulus and the pent-up demand will make the second half of this year one of the strongest periods for economic growth in history. As a result, we were buyers on dips during February and will continue to put money to work on other tradeable declines we see in March.

If you know someone who would be interested in learning more about Greenberg Financial Group, or who is retired or thinking about retiring, or would simply like us to review their current portfolio, please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790. You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.

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