Markets experienced another correction once again at the end of the month. Media claims the surge in yields as the primary cause for the global market slip, but we do not necessarily agree to this claim, as we see the correction mainly as a result of profit taking in the market. Over the month, the S&P 500, the Dow, and the NASDAQ were up 2.61%, 3.17%, and 0.93% respectively.
Market sentiment improved as vaccine optimism continues to build up, it is estimated that most major western economies would be able to vaccinate most of their population by the end of 2021, which points to a swift return to normal. However, bond yields surged later on in the month, triggering market correction due to the speed of the surge. In our opinion, long end bond yields going higher while the short end stays unchanged is simply a steepening of the yield curve, which is traditionally considered to be an indicator of a positive economic outlook.
Henceforth, the latest market movement is likely a healthy correction, as the market has gained a lot since November 2020. Such a correction reduces the valuation multiple, bringing it more in line with the historic average. Considering the current recovery in the economy, proven by the leading economic indicators, the steady progress of the vaccination rollout, and the passing of the huge stimulus bill, the outlook of the US equity remains positive for the year.
