February Market Update

Friends,
 
Most major equity indexes posted positive returns in February continuing their upward momentum in 2021. The Russell 2000 Index was up over 3.50% for the month. The S&P and Dow Jones Industrials were up 1.10% and 2.65% respectively.  The Nasdaq 100 was down over 2.50% as Apple’s 9.5% declined weighed on the index. US Government bonds continued their sell off in February. Yields on longer dated US Treasury Bonds increased by a whopping 30 basis points driving bond prices significantly lower.  TLT, an ETF that tracks investment performance of US Government bonds with a maturity of 20+ years was down 5.85% in February and is down over 9.00% for the year.  

The graph below highlights how much bond yields have increased in 2021.  The yield curve is steepening as short term rates are anchored as long term rates increase.

With the rollout of the vaccines, the economy looks to a brighter future. For bond investors an economic turn around coupled with a stimulus package that will be financed with added borrowings signals trouble.  US Government debt outstanding is racing towards $30 trillion dollars. To put that into context in 2000 our debt outstanding was just north of $5 trillion dollars.  As the need to issue more debt to fund various stimulus programs increases the market becomes saturated and the clearing yields go higher.  Below is a graph of US Treasury Debt outstanding since 2005.  This is something that will become an issue if rating agencies take notice.

As always, if you have any questions, feel free to reach out.

Best,
Bob

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Jeremy Suarez

Jeremy has been in the financial advisory business since 2005 after graduating from Fordham University’s School of Business. He joined Tomoro as a managing partner in 2014. During his tenure, Jeremy has consistently excelled as an advisor in both the personal household and business planning arena. As a managing partner, Jeremy also serves as a mentor to all associates and is hands-on in supporting Tomoro’s growth planning. He has completed various curriculums and certifications, such as New York University’s graduate studies in financial planning, is a Certified Exit Planning professional, and Investment Advisor Representative. He and his family reside in Colts Neck, NJ.

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The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. The Hang Seng Index (HSI) is a market-capitalization-weighted stock market Index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.

Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. Equities may decline in value due to both real and perceived general market, economic, and industry conditions.

Statistics sources from Central Bank Rates and Bloomberg.

2021-115741 Exp 2/23