Financial Market Roundup
Produced by Fifth Third's Investment Management Group

In the following piece, Fifth Third's Investment Management Group recaps the market and how it reacted to various events in the month of March.

GLOBAL
TRENDS

Yellow Arrow Pointing Right - Neutral

The COVID-19 pandemic has continued to have a major impact on life across the globe, and therefore economic activity, employment, and corporate earnings. Governments around the world are still maintaining strict COVID-19 related guidelines to combat the spread of the virus. Several countries have approved COVID-19 vaccines and are beginning distribution starting with those most at risk. Nearly 100 million Americans have received one dose through the conclusion of March. The Biden administration has implemented aggressive plans in distributing the vaccine that will allow for further opening and proper functioning of the economy. Lingering COVID-19 economic restrictions, vaccine distribution and administration data, government fiscal stimulus measures, central bank policy actions, geopolitical tensions, and inflation measures are topics that the Investment Management Group is monitoring.

CENTRAL BANK
POLICIES

Green Arrow Pointing Up - Positive

Global central banks continued to support the global economy by maintaining low interest rates and implementing programs to increase market liquidity in response to the COVID-19 pandemic. The Federal Reserve held rates steady at its March meeting and officials expect rates to be on hold through 2023. The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. The Federal Reserve is not expected to raise rates until full employment is met. The European Central Bank (ECB) left rates unchanged at its March meeting and committed to speeding up bond purchases to keep borrowing costs low. The Bank of Japan held its key interest rate unchanged at its latest meeting and has vowed to act as needed amid virus uncertainty.

EQUITY
PERFORMANCE

Green Arrow Pointing Up - Positive

Global equities were positive in March as investors continued to assess vaccine progress, massive fiscal stimulus and a new U.S. Presidential administration. The S&P 500 Index increased 4.4% in total return in March. The blue-chip Dow Jones Industrial Average rose 6.8%, and the tech-heavy NASDAQ Composite rose 0.5% for March. International stocks also gained, with the MSCI All Country World Index of developing and developed market stocks rising 2.7% for the month. Developed international equities outperformed emerging market equities with the MSCI EAFE Index of developed market equities up 2.4% in March, while the MSCI Emerging Markets Index declined 1.5% in total return last month.

INTEREST RATES
AND GROWTH

Green Arrow Pointing Up - Positive

Yields were higher in March. The yield on the benchmark 10-year U.S. Treasury rose 34 basis points in March to end the month at 1.74%. The ongoing bear market in bonds may be driven by increasing inflation expectations amid a strong macroeconomic environment, solid corporate earnings, improving COVID-19 trends and expectations for more fiscal stimulus. The U.S. economy expanded at a 4.3% annualized rate in the fourth quarter of 2020, and unemployment still remains at elevated levels near 6.0%. The path of the global economic recovery for 2021 remains uncertain and will depend on the combination of COVID-19 containment, subsequent lifting of economic restrictions and vaccine distribution.

POLITICAL AND
REGULATORY TRENDS

Green Arrow Pointing Up - Positive

The U.S. government passed a $1.9 trillion COVID-19 relief bill on March 10, 2021 after several weeks of discussion. The major highlights of the bill included $1,400 payments to individuals, an extension of unemployment insurance and funding towards vaccine distribution. President Biden revised his initial COVID-19 vaccination goal to 200 million within his first 100 days in office. On March 31, 2021, President Biden proposed an infrastructure bill that will amount to more than $2 trillion over eight years. This bill is expected to be funded by an increase in the corporate tax rate to 28%, but is still in need of approval. These initiatives are all part of the administration and Treasury Secretary Janet Yellen’s efforts to support economic growth after COVID-19’s global disruption.

INVESTMENT
TRENDS

Green Arrow Pointing Up - Positive

Domestic political outcomes have been settled, vaccine distribution is well underway, and central banks and governments continue to offer monetary and fiscal stimulus; the combination of which has lowered overall economic and financial market uncertainty. While markets are feeding off of massive fiscal stimulus and indicators of improving economic data, some areas of the economy, including labor and travel industries, remain depressed. The conclusion of March marks approximately one-year since the start of global lockdowns and disruptions that are still felt. The strong efforts that both governments and pharmaceutical companies have put into a vaccine are starting to prove well placed and has helped many investors remain hopeful that the COVID-19 pandemic will be better contained, and that economies will continue to recover.