Stocks Digesting Interest Rates & Vaccine Progress!

Stocks appear to be digesting this fact: interest rates are truly rising.

I’ve suggested in prior blogs that if rates rise gradually and stay within a range, the stock market should be able to adjust, albeit, increased volatility.

Low Interest Rates have been one of the key ingredients to stock gains over the past several years.  Ever since the Great Recession, rates have trended downward with stocks going higher.

Low rates help businesses operate more profitably, help consumers purchase homes and cars more affordably.  Low rates also make stocks more attractive because of the prior sentence.

Last year, during the height of the pandemic, the 10-Year US Treasury rate fell to .50%.  There was much talk about the Federal Reserve moving rates below zero.  Last week, the 10 Year US Treasury moved up .15 to a yield of 1.35%.  This is up from .91% this past New Years Eve, roughly 52 days ago.

I continue to consider the 10-Year yield may trend back to the pre-pandemic level of 1.91%, where the yield stood on December 31st, 2019.

Markets Mostly Down for the Week

Over the pond stocks, bucked the weekly trend with Developed Markets up .28% and Emerging Markets up marginally. .90%.

In the US, other than the Dow gaining .16%, all other major indexes finished south, with the S&P 500 off (.68%), the Nasdaq Composite down (1.54%) and the Small Cap Russell 2000 (.98%).

The Barclay’s Aggregate Bond Index fell (.57%) and is now down (1.80%) for the Year.

Vaccine Progress! 

It’s been absolutely wonderful having clients back in our office for reviews.  Other clients are preferring to use Zoom for the time being which is fine. I’ve been asking all clients if they’ve had the vaccine, or are scheduled to do so?  Everyone I’ve spoken, has either had their first shot or is scheduled to do so.  Keep in mind, our clients are most typically age 60+.

This to me, is good news.  Even with the distribution issues, which I think were expected and the awful weather in parts of the country, we ARE MOVING forward.

I’ve signed up, however have not been contacted.  I’m age 58.  My “Michelle,” is 5 years younger and is scheduled for her first shot next month.  Looking forward to this distribution process being finished.

Here is a great link to a vaccination progress tracker. It breaks down the number of administered doses by state, as well as the nation’s progress as a whole!

It’s definitely not clear after the vast majority of us are vaccinated, what will that actually mean?

  • Will we still wear masks in public?
  • Will we still social distance?
  • How about Travel via Air, Train, Buses?
  • Will we need to receive annual vaccinations?
  • Will we need to carry something to prove if and when we were vaccinated?

And you darn well know, I’m focusing on how stock and bond markets will be impacted by rising rates, assuming they continue, the population becoming vaccinated, and of course, changes coming for income taxes and other laws with the new Biden administration.

 

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