Equity Overview

March saw dramatic sector rotation in the stock market.  Utilities were the weakest sector in February but the strongest in March.  Energy was the strongest in February and among the weakest in March.  Most significant for our portfolio, technology was the worst performer in March.

Equally significant, and continuing the trend since January, value stocks far outpaced their growth counterparts.  Mid-cap and small-cap growth stocks were hit particularly hard and sustained meaningful losses.

Volatility was substantial in the first week, when the S&P 500 moved more than 1% in four of five trading days, but diminished over the balance of the month.

Macro Overview

Economic data reported in March was generally positive as manufacturing, factory orders, and employment numbers all showed strength.

The Commerce Department raised its estimate of 4^th quarter 2020 GDP growth to 4.3%, indicating that economic recovery was underway at the end of last year.  That will be reinforced by the $1.9-trillion American Rescue Plan, passed by Congress and signed by the president in March.  And it will be turbocharged if the infrastructure legislation proposed by the Biden administration is enacted anywhere near its $2-trillion price tag.

The Fed maintained short-term interest rates near zero.  While some Fed governors have suggested that those rates could rise next year, Chairman Powell has insisted that there will be no rate increases until the economy reaches full employment and inflation rises above 2% and stays there.  In his view, those conditions will not be met until 2023 at the earliest.