April Mid-Month Update

By Ryan Gilmer, CFA, CMT Chief Investment Officer

April 16, 2021

Yesterday marked the typical annual observance of tax day. Even though this year the tax deadline has been extended to May, we are still celebrating.

Here is a recap of market performance for the month of April and year-to-date:

Stocks increased during the first half of April, with US large cap and international stocks handily outperforming US small cap. During this timeframe, bonds have rebounded and posted positive returns. Year to date, all stock categories are positive, with small cap stocks doing best. Despite a positive month, bonds are still negative on the year.

Looking Back To A Prior Update

At this time last year, financial markets had a sharp, significant rally following the pandemic-induced crash. At the time, investors had many doubts and questions swirling in their minds. Was the worst over? Would the markets resume crashing? Is it too late to add new cash to my account given the recent strong rally?

To address these issues, we wrote an article publishing the following information from Strategas Research. In the first two columns, the table shows the best historical 15-day increases in the S&P 500. For example, the S&P 500 rose 22% in the fifteen-day period ending 3/26/2009. The other columns show returns at various intervals after this end date. During many similar periods, future returns, especially over 125 and 250 days, were still higher than average.

A year ago, the market had just rallied 27.2% from March 23rd through April 14th – a huge move. We didn’t know what was coming next, but thought it would be interesting to track market performance over the following 20/65/125/250 days. This 250 trading day period ended April 9, 2021, and turned out to be the best on the table, up 45.07%. Investors have had an awesome year.

So what do we do now? Is it too late to invest after a period of sensational returns?

We don’t think it’s ever too late to invest, but it can be complicated. Here are some thoughts about the coming year:

  • Risk always exists – We never know what form “risk” will take. A year ago, risk revealed itself as a novel virus pandemic, casting a shadow over the global economy and markets. Now, with the pandemic largely behind us, “risk” could mean any number of other things. Stocks have gone up a lot and may need time to consolidate their gains. Another bad thing could happen. But, the whole point of risk is that we can never be certain how the future will play out.
  • Markets come back – Investors who stay the course and endure down markets tend to have better outcomes (returns) than those who choose to be very conservative and hold lots of cash. In the past 15 years, the S&P 500 fell over 50% during the financial crisis and 35% during the COVID pandemic. Today, it sits at its all-time high. Market declines aren’t the end of the story; rebounds are typically very strong too.
  • It’s not all or nothing – Your portfolio depends on your own financial circumstances and goals. But for the most part, it’s a bad idea to be all in or all out. Having a balanced, diversified portfolio is good preparation for a wide range of futures. Maybe next year returns will be positive, and maybe not. Maybe markets will be volatile, and maybe they will be boring. Balancing your investments gives you the durability to keep going, no matter what the future brings.
  • We control our own decisions – Pastor Charles Swindoll famously said “The only thing we can do is play on the one string we have, and that is our attitude...I am convinced that life is 10% what happens to me and 90% how I react to it. And so it is with you.” This applies to investing as well. We can’t control what the federal government does, or what the Federal Reserve does. We can’t control how other market participants buy or sell. As investors, we too play the string we have: our response to whatever happens. Over the past 250 trading days, we have sold investments and purchased more attractive replacements. On multiple occasions, we’ve rebalanced investments by selling the outperforming funds and adding to underperforming ones. Over the next year, as always, we’ll continue to respond positively to whatever happens. 

Thanks for the opportunity to work with you. If you would like to discuss these topics further, please let me know. 

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