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February 2021
Market Update
(all values as of 06.28.2024)

Stock Indices:

Dow Jones 39,118
S&P 500 5,460
Nasdaq 17,732

Bond Sector Yields:

2 Yr Treasury 4.71%
10 Yr Treasury 4.36%
10 Yr Municipal 2.86%
High Yield 7.58%

YTD Market Returns:

Dow Jones 3.79%
S&P 500 14.48%
Nasdaq 18.13%
MSCI-Europe 3.72%
MSCI-Pacific 3.05%
MSCI-Emg Mkt 6.11%
US Agg Bond -0.71%
US Corp Bond -0.49%
US Gov’t Bond -0.68%

Commodity Prices:

Gold 2,336
Silver 29.43
Oil (WTI) 81.46


Dollar / Euro 1.06
Dollar / Pound 1.26
Yen / Dollar 160.56
Canadian /Dollar 0.73

Macro Overview

Recent speculative trading among smaller retail investors raised concerns about how social media is influencing individual stock price movements. Popular social news aggregation and discussion websites are influencing frantic trading behavior, often by inexperienced traders, which is occasionally driving prices far above valuations that would be traditionally implied by traditional equity valuation methods. Some market participants and politicians are calling for heightened regulation and scrutiny surrounding these websites and how they operate.

Vaccine production and distribution is being closely monitored by market analysts and economists due to the tremendous impact it has on consumer behavior and sentiment. Consumer expenditures have been curtailed by stay-at-home mandates and risk of infections in public locations including retail stores and restaurants.

The Internal Revenue Service (IRS) will not accept 2020 tax returns until February 12 due to staffing shortages and COVID-related rules that were enacted in December 2020. Acceptance of prior year returns traditionally would have started two weeks sooner. Taxpayers owed a refund may see a delay in receiving funds, although the April 15 tax filing deadline will remain the same.

Economic growth for the U.S., as measured by Gross Domestic Product (GDP), rose at a rate of 4% in 2020, following a contraction of over 31% in the second quarter alone. The dramatic collapse and ensuing rebound for economic growth was historic in proportion.

Since COVID vaccine distributions began on December 14, 2020, more than 29.5 million doses have already been administered in the United States as of January 30, 2021. Total doses distributed but not yet administered stand at nearly 50 million as of the end of January. The federal government has primarily delegated prioritization and distribution of the doses to individual states. Some health care experts and economists are concerned that slow distribution of vaccinations worldwide will postpone sustainable economic resurgence.

Data gathered by the U.S. Census Bureau as of January 22, 2021, reveal that millions of Americans are not spending their stimulus checks, but are rather saving the funds or paying off debt. With over 37.5 million people opting to save their stimulus payments, a growing number of policymakers believe that millions who are receiving stimulus checks may not actually need them.

Sources: Census Bureau, Rockefeller Foundation, CDC, Federal Reserve, IRS

37.7 million opting to save rather than to spend their stimulus checks

Volatility Returns To Markets – Domestic Equity Update

Equity indices were nearly unchanged for the month of January following notable volatility that drove prices higher and lower throughout the month. Many market analysts have historically view January performance as an indicator of where markets may head for the remainder of the year. Volatility spiked in equity markets in late January, due in part to a combination of speculative trading among relatively small retail investors and short position covering among some hedge funds and other short sellers. Leading sectors for the month were energy, heath care, and consumer discretionary, while materials and industrials lagged. (Sources: Bloomberg, Reuters)

Rates Rise With New Year – Fixed Income Overview

The yield on the 10-year Treasury bond surpassed 1.0% for the first time since before the pandemic made a significant impact on financial markets in March of 2020. The 1% mark is widely considered a psychologically-significant level for bond traders. The 10-year Treasury is used as a benchmark by many lenders for business and consumer finance rates.

The Federal Reserve is generally expected to hold rates steady for the better portion of this year, but may begin to scale back its bond buying program and tighten Fed policy initiatives should the economy strengthen over the next few months. (Sources: Federal Reserve, U.S. Treasury)

What People Are Doing With Their Stimulus Payments – Consumer Behavior

Surveys conducted each week by the U.S. Census Bureau are detailing what Americans are doing with their stimulus payments. Data gathered from various stimulus recipients, across all income levels and educational backgrounds, revealed that a large portion of those who received payments used their funds to pay off debt. The most recent data as of the week ending January 22, 2021, show that nearly 75.5 million people of the 249 million that were surveyed, used the funds to pay off debt.

In addition to paying off debt, recipients also saved their payments, with over 37.7 million opting to save rather than to spend their stimulus checks. Because of these statistics, an emerging theory proposes that millions of Americans receiving stimulus payments may not actually need them.

For those recipients who are spending stimulus checks, about 85% of those surveyed are spending it on household expenses, such as groceries, clothing, and appliances. (Source: U.S. Census Bureau)



Nearly 1.8 million workers were absent from work in November 2020

Workers Calling In Sick – Labor Market Overview

A growing number of U.S. workers are calling in sick to work as the fear of COVID infections has escalated over the past few weeks. The number of days that workers missed due to illness and calling in sick has doubled since the pandemic began, according to the U.S. Census Bureau. The rate of absenteeism, as termed by economists, has remained relatively high since March of last year. Nearly 1.8 million workers were absent from work in November 2020 due to illness, nearly as many as the 2 million that called in sick in April 2020.

Economists and marketing analysts expect the lingering sick calls to hinder retail sales and consumer spending, posing an obstacle to economic growth. Product shortages are also a concern, given that absent workers are not available to stock inventory and transport goods across the country.

The most recent Household Pulse Survey estimates that more than 11 million workers were absent from the work place at some point in 2020 due to the coronavirus. Many were absent because of the fear of contracting the virus, while others were absent due to hardships at home including caring for children and elders. The effects of missing workers has been especially felt in the manufacturing industry, which currently has over 500,000 job openings throughout the country, the most since 2000. Health care and personal care workers carry among the highest absenteeism of occupations, with roughly 4.5% of the workers in those sectors calling in sick in 2020.

Sources: Census Bureau, Labor Department, Household Pulse Survey

IRS Sets Later Date To Accept Returns – Tax Planning

The IRS announced that it will not start accepting individual tax returns for tax year 2020 until February 12. A law passed by Congress in December designed to prevent fraud was a significant factor in the decision by the IRS to delay the date on which it would begin accepting tax returns. As a result, taxpayers may be required to wait an extra month or two before receiving tax refunds due.

Millions of individuals who did not receive stimulus payments from the government may be able to claim those funds through their 2020 tax returns. Households that had children who were not noted as dependents on 2019 tax returns may have additional claims to stimulus funds. The IRS suggests that individuals and households file their taxes electronically in order to receive refunds more quickly.

Source: Internal Revenue Service

SS COLA 2021 increase of 1.3% is less than Medicare Part B increase of 6%

COLA And Medicare Premium Increases – Retirement Planning

Even before the onset of the COVID-19 pandemic, seniors often postponed retirement until later than planned and took part-time jobs even after retiring. Longer lifespans for millions of Americans has translated into a financial challenge as they deal with the reality of dwindling assets during an extensive period of retirement. The single greatest danger for retirees has historically been inflation. Over the past year, inflation expectations by consumers project nearly a 3% rate, approaching the 50-year average rate of 4%. With that in mind, housing, food, energy and healthcare expenses are all expected to gradually rise over the next few years. Since the majority of retirees live on a fixed income, the ability to keep ahead of inflation becomes more difficult as time goes on. If the annual inflation rate is 3%, then the cost of living will essentially increase by about 34% more over ten years.

At the center of retirement-related political controversy is Social Security. Even with COLA applied to Social Security payments, medical expenses not covered by Medicare are expected to rise more than the COLA increases as projected by the Senior Citizens League. The COLA increase for 2021 Social Security payments is 1.3%, while the increase in Medicare Part B premium for 2021 is 6%, a significant difference that is problematic for those entirely dependent on Social Security. (Sources: Social Security Administration, Senior Citizens League)

How The Fed Makes Money For The Government – Government Structure

The Federal Reserve acts as a separate entity from the U.S. government, and has the ability to create and manage its policies for the benefit of the U.S. financial system. Large banks throughout the country, known as money center banks, deposit their excess cash with the Federal Reserve. The Fed in turn pays interest to banks on those deposits. When interest rates fall, the Fed pays out much less in interest expenses. After the Fed pays all of its operating expenses, it then sends the rest to the U.S. Treasury. The U.S. Treasury uses the funds to help cover U.S. government expenses and bills.

In 2020, the Federal Reserve sent $88.5 billion in profits to the U.S. Treasury, nearly a 66% increase from the previous year. Payments to the Treasury by the Fed fell for the past few years as rates increased. The onset of the pandemic and the dramatic reduction in interest rates by the Federal Reserve in 2020 sharply reduced interest payments from the Fed to banks on excess reserves. (Sources: Federal Reserve, U.S. Treasury Dept.)