Home Guides & Resources chevron_right Weekly Update From Bear to Bull: A Year of Uncertainty March 29, 2021 Table of Contents The Stocks Leading the Recovery Growing Pains Amid a Sustained Rebound Podcast: Wiener & Lowell—Lessons From a Pandemic Year Financial Planning in Your 50s: Streamlining Strategy Activity Update Adviser Investments’ Market Takeaways Looking Ahead Please note: This update was prepared on Friday, March 26, 2021, before the market’s close. Economists like to talk about the “green shoots” of economic recovery—signs that growth has returned and an expansion is upon us. After a dismal February, signs of recovery emerged yet again, but the green that captured our collective attention this week was Evergreen Marine’s Ever Given, the massive tanker blocking the Suez Canal. And its plight is definitely not a sign of economic growth. The skyscraper-sized container ship wedged shore-to-shore in the middle of the Egyptian desert is single-handedly blocking billions of dollars in global trade every day it remains mired in the muck. Rescue crews say it may take another week or more to clear the blockage from one of the world’s busiest waterways. The debacle could further hamper an already tenuous supply chain made fragile due to this winter’s extreme weather and COVID-19-related shortages in raw materials and semiconductors. Automakers have already been forced to curtail production as the chips they need to run today’s computer-dependent engines are in short supply. The Ever Given’s grounding could exacerbate problems elsewhere in the global economy. As far as the markets are concerned, the plugged Suez has yet to have a major impact. Tech stocks have dragged on the broader indexes so far in 2021 and the past week was no different. On a total return basis, the 30-stock Dow Jones Industrial Average is up 7.1% for the year through Thursday, while the S&P index, which is more heavily dominated by the tech sector, has gained 4.5%. The MSCI EAFE index, a measure of developed international stock markets, has returned 2.6%. The Bloomberg Barclays U.S. Aggregate Bond index’s yield stood at 1.56%, up from 1.12% at the end of 2020. The U.S. bond market has declined 3.1% this year. The Stocks Leading the Recovery Tech stock dominance has become synonymous with the astonishing rebound and bull market following the market’s March 23, 2020 bottom. One year later, for a sense of how the universe of standard investment options have fared, we took a look at Vanguard’s roster of funds to crown a recovery king. Care to guess which one led the pack? It was Vanguard’s U.S. Value Factor ETF, with a 131% return over the 365 days since the pandemic bear market bottom. That may come as a surprise given the prevailing notion that tech has been the engine propelling the market’s recovery while value-oriented stocks were the laggards. And, sure, that idea isn’t without merit—Vanguard’s Information Technology Index gained 46% in calendar year 2020 while the aforementioned value ETF returned just 2%. But the tide started turning toward value-oriented funds late last year and has gained speed in 2021. Note: Chart shows cumulative total returns for the three funds on a daily basis from 3/23/2020 through 3/25/2021. Source: Morningstar. One takeaway: When emerging from a bear market or recession, the so-called “value” or “cyclical” sectors often benefit disproportionately during the early stages of an economic rebound, though that outperformance can quickly fade. Growing Pains Amid a Sustained Rebound After weeks collecting the data and refining the estimates, the Commerce Department’s final read was that the U.S. economy grew 1.1% during 2020’s fourth quarter, leaving it nearly 2.5% smaller than at 2019’s end. Expectations for the first quarter of 2021 are that while growth will be stronger, it won’t match the inflated expectations that many economists had as the year dawned. Still, there are plenty of reasons for optimism: The job market is showing signs of life, the number of vaccinated Americans continues to rise, warm weather has returned to much of the country and more businesses are reopening. That isn’t to say there aren’t growing pains to contend with. The housing market is a case in point. Historically low mortgage rates and the work-from-home pivot (sparking demand for more space) supercharged the housing market over the last year, and ebbing inventory has pushed prices dramatically higher. In February, the average home cost 16% more than it did a year ago. Add in weather-related building slowdowns and supply shortages in construction materials and today’s hot housing market reflects both an improving economy and the opportunity to be a huge job creator. But, as noted, it is far from frictionless. Another growth problem is rising gas prices. The average price for a gallon of gas in the U.S. rose to $2.88 last week, up around one-third from the same time last year as pandemic lockdowns curtailed fuel use. It’s possible fuel prices will continue to climb as the economy opens up further and cabin fever leads to summer road trips—but it’s equally possible that we’re near a price peak as refineries crank up to full capacity to meet the increased demand. Do rising prices in the housing market and at the gas pump mean runaway inflation is around the corner? We don’t think so. We’ve written recently about the hot air around inflation concerns, and in the coming months you’ll see the year-over-year inflation numbers jump higher. But remember, these figures are comparisons to the first months of the pandemic when inflation plummeted. The eye-popping numbers you’ll see in the headlines should be short-lived. Podcast: Dan Wiener & Jim Lowell—Lessons From a Pandemic Year This week, Chairman Dan Wiener and Chief Investment Officer Jim Lowell take a look back at the stock market’s swift, pandemic-induced crash a year ago—and the lessons they’ve learned as investors during one of the most prolonged stress tests our society has faced. Their wide-ranging discussion covers: The herd behavior and investment fads that drove stir-crazy markets Whether stocks are currently overvalued The bitcoin rally and what it portends for the future of digital currencies If today’s inflation fears are grounded in reality How China’s economy is emerging from the pandemic It’s been a year the likes of which we’ve never seen—click here to listen to Dan and Jim help make some sense of it! ***** Financial Planning Focus Planning in Your 50s: Streamlining From your first checking account to your current 401(k) plan, by the time you reach your 50s, you may have opened accounts with numerous financial institutions. But if you’re like most people, you may not have closed nearly as many. If you’re receiving account statements from a plethora of firms, we recommend consolidation. Streamlining can help improve your investment returns, reduce fees and, most importantly, give you a clearer picture of your financial situation—a crucial step when preparing for retirement. Here are five ways to simplify your financial life: Use fewer custodians. Trying to maintain a cohesive portfolio strategy with multiple accounts at different institutions is sure to create confusion. The best fix is to decrease the number of accounts you manage, making it easier to grasp the overall state of your finances and remain on track with your goals. This will be even simpler if you can consolidate with a single custodian. Reduce excess cash. Your emergency fund is the foundation of your financial plan. We recommend keeping enough cash to cover three to six months of expenses. But after years of asset accumulation, you may find that you have more cash on hand than you need, scattered among multiple accounts. As a result, you’re likely missing out on years of compound growth. Consolidate retirement savings. Odds are you haven’t spent your entire career with one employer—meaning you may have retirement funds stashed in several 401(k) or retirement accounts. Leaving funds to languish in forgotten accounts often means they’re part of a stale investment strategy that’s no longer suitable for your goals. In some cases, rolling the funds into an IRA might lower your costs and improve your returns; in others, it may be preferable to stick with a 401(k). Put your estate in order. Having accounts that are streamlined, with beneficiaries listed, will help ensure that your assets pass to heirs in accordance with your wishes. It will also make it easier for your beneficiaries to settle your estate. Avoid tax penalties. Under current law, required minimum distributions (RMDs) from your retirement accounts begin at age 72. Consolidating your retirement accounts where possible will make RMD management easier, helping you avoid tax penalties. ***** Strategy Activity Update Please see below for a summary of the trades we executed over the week through Thursday and our current tactical strategy allocations. Dividend Income No trades this week. AIQ Tactical Global Growth Sold iShares Core S&P 500 ETF (IVV). Bought iShares US Healthcare Providers ETF (IHF). AIQ Tactical Defensive Growth No trades this week. AIQ Tactical Multi-Asset Income Sold VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL), proceeds to cash. AIQ Tactical High Income No trades this week. Adviser Investments’ Market Takeaways You can find two new Market Takeaways videos on our website. Research Analyst Liz Laprade talked about potential tailwinds for cannabis stocks while Vice President Steve Johnson discussed some recent green lights for the economy. Looking Ahead Next week brings a relatively light slate of economic data. Still, we’ll be looking closely at useful reads on home prices, consumer confidence, manufacturing, construction spending, car sales and the March unemployment rate. As always, you can visit www.adviserinvestments.com for our timely and ongoing investment commentary. In the meantime, all of us at Adviser Investments wish you a safe, sound and prosperous investment future. About Adviser Investments Adviser Investments is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. Please note: This update was prepared on Friday, March 26, 2021, before the market’s close. This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Purchases and sales of securities listed above represent all securities bought and sold in each strategy during the period stated. Each strategy’s portfolio generally includes more holdings in addition to the transactions listed above and in some cases the securities listed above may only represent a small portion of the particular strategy’s complete portfolio. Further, the securities listed above are not selected for listing based on their investment performance; thus it should not be assumed that any of the securities listed above were profitable or will be profitable, nor should it be assumed that future recommendations will be profitable. Clients and prospective clients should only make judgements about a strategy’s performance after reviewing the strategy’s composite performance information. There is no assurance that each security listed above will remain in the strategy’s portfolio by the time you have received or read this email. Securities are listed for informational purposes and are not intended as recommendations. Existing investor accounts may not participate in all transactions listed above due to each account’s particular circumstances. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them. The Adviser You Can Talk To Podcast is a registered trademark of Adviser Investments, LLC. For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here. © 2021 Adviser Investments, LLC. All Rights Reserved.