2021 Second Quarter Market Outlook
As we went through the first quarter of 2021 the COVID19 pandemic continued to be front and centre concerning major news events. Vaccines are bringing some hope of light at the end of the tunnel but now variant COVID19 viruses are making this dark tunnel even more difficult to navigate.
Another phase of COVID19 infections are making it difficult to see a positive outcome over the next three to six months but I feel one is forthcoming.
The stock markets are now providing an indication that the economy is improving as we see cyclical stocks like energy and consumer discretionary stocks rally as the past market leading tech stocks were sold to raise cash and lock in capital gains. This projected economic strength has spooked the bond market with 10 and 30-year bonds selling off and interest rates rising. Central banks are able to control short-term interest rates, but it is much more difficult for them to affect long-term interest rates.
Current macro economic outlook dictates the trend of interest rates for longer term bonds and presently the outlook forecast is that inflation pressures are building as global economies recover through 2021 and into 2022.
So far rising long-term interest rates in 2021 have recently affected growth stock like tech more than value stocks like the cyclicals I already mentioned. The higher long-term interest rates rise the more risk there is in a significant market correction occurring. For now, I see global stock markets trending higher while interest rates in the short-term trade in a range with a bias to the upside over the next six to twelve months. We are mostly invested with a conservative equity tilt and will probably remain that way through the summer.
If you have any questions or comments please contact me.
bachtymichuk@activewealthpartners.com