The Vantagepoint Market Perspective: Vaccines, Stimulus, and Reopenings Add Up

04/06/2021

 

Friday’s jobs report showed what a powerful combination trillions of dollars of stimulus, improvements in vaccine distribution and administration, and the reopening of the economy can be.

Economic Tailwinds

Prior to the latest $1.9 trillion round of economic stimulus, the federal government had already passed roughly $4 trillion in spending to lessen the impact of the pandemic and the shutdowns.

Although the stimulus payments to individuals have largely already been distributed, other parts of the stimulus packages with payments to businesses, state and local governments, and others will be paid out in coming months. That unprecedented level of stimulus has provided a major tailwind to the economy and will likely continue to do so throughout 2021.

In addition, as vaccinations have become more available and their administration more widespread, increasing numbers of people have received them. According to the Centers for Disease Control and Prevention, as of April 5, 32.4% of the U.S. population had received at least one dose and 18.8% were fully vaccinated.

Add in the partial and sometimes full reopenings in some parts of the country and the combination bodes well for the economic recovery.

Monthly Jobs Report

The economy added 916,000 jobs in March, the best showing since August 2020. Nearly a third of that hiring took place among leisure and hospitality businesses, which speaks to the impact that a reopened economy can have.

In addition, the payroll totals for the past two months were revised higher, bringing January’s tally to 233,000 and February’s to 468,000. Meanwhile, the unemployment rate ticked down to 6.0%, while the labor force participation rate rose to 61.5%.

The market responded accordingly, with the S&P 500 and the Dow Jones Industrial Average notching new all-time highs on Monday in the first day of trading since the Friday holiday release of the employment report.

Risks Remain

That’s not to say that there aren’t still risks to the recovery, both in terms of the pandemic and the economy.

As is the case with most viruses, there have been mutations of COVID-19. And though the current crop of COVID-19 vaccines was developed before those mutations emerged, research shows they can still provide protection against the virus’ most severe effects. Also, some vaccine manufacturers have reportedly been working on booster shots to counter the mutations.

 

Meanwhile, though the number of COVID-19 infections ticked upward in recent weeks, the number of deaths caused by the virus has continued to trend lower. This may be because so many of the elderly — who are most susceptible to the virus’ worst effects — have now been vaccinated.

And as the infection has moved downstream in terms of younger age groups, the people who do catch it have immune systems that should be better able to survive it without severe effects.

Looking Ahead

Moving forward, from a market perspective, the prospect of inflation continues to lurk in the background. Still, we believe that any inflationary effects that surface this year are likely to be discounted by the market as something that is temporary, at least in the short term.

The question becomes — particularly in light of the Fed’s seemingly unflinching commitment to keeping its benchmark interest rate at rock-bottom lows until the labor market has recovered — what happens if inflation is really here for the long haul? If the market decides that is indeed the case and that it’s likely to continue into 2022, we may well test the market’s seemingly endless optimism as repeated new highs could run into some inflationary headwinds.   

 

Disclosures:

This information is intended for institutional use only and is not intended for individual investors or the general public. This article includes links to external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.

This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision. Investing involves risk, including possible loss of the amount invested. Past performance is no guarantee of future results.

When Funds are marketed to institutional clients by our Investment Only (IO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.                                                                                                                              

Disclosures:

This website is for institutional use only and is not intended for individual investors or the general public.

This information is intended for institutional use only and is not intended for individual investors or the general public.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.
This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither MissionSquare Retirement nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision.

When Funds are marketed to institutional clients by our Investment Only (IO) team, the Funds are offered by MissionSquare Retirement Services,, an SEC registered broker-dealer and FINRA member firm. MissionSquare Retirement Services is a wholly-owned subsidiary of MissionSquare Retirement and is an affiliate of VantageTrust Company, LLC and MissionSquare Investments. Learn more at www.vantagepointfunds.org.