March Commentary

In March, our net weighted average return in was -1.22%. Our net average return for the month by strategy:

Conservative: +0.39%

Balanced: -0.87%

Growth: -2.85%

For the first quarter of 2021, our net weighted average return was +3.07%. Since 2015, we have generated a net weighted average return of +59.14%.

How things look

As we get further into April, markets will be focused on two things: corporate earnings and economic calendars.

Equity markets have continued their steady march upwards over the past months, operating under high expectations that company earnings will bounce back strong. From what we have seen so far, particularly in the US, those expectations are warranted.

That is also apparent from the broad economic indicators, which show that the US economy is steadily recovering and even surpassing initial expectations. Even in Europe, despite continued lockdowns and successive waves of the virus, indicators are pointing in the right direction.

Things are looking up.

Amid this positive sentiment and good news, expect to see many more headlines like this one from today’s Financial Times:

Like most financial metrics, these quarterly figures reflect year-over-year economic results. Given the complete lockdown China experienced in February and March of last year, it is important to remember just how much economic activity contracted because of the virus. Last year’s numbers provide an extremely low base, and we can expect to see many more astonishing figures like this one in the coming weeks and months.

But watch out when it comes to inflation.

As the economic rebound continues and fiscal stimulus continues to work its way through the system, inflation will also uptick in the coming months. Inevitably, there will be plenty of loud commentary from financial professionals warning that central banks are behind the curve and inflation has accelerated at a dangerous pace. However, this needs to be understood for what it is, an increase from a low base.

It is also important to remember just how much supply chains have been, and continue to be disrupted because of the virus. There are plenty of examples of severe deficits of both commodities and finished goods pushing up prices everywhere. Take lumber, for example:

These are mostly short-term issues and they will be resolved. We are not about to experience bouts of hyperinflation. Nevertheless, higher inflation in here to stay.

Our underlying thesis remains that the COVID-crisis marked the transition from monetary to fiscal dominance. The crisis made politicians and economists realize that most modern-day societies are not constrained by financial restraints, but instead face real resource limitations. As the green transformation further accelerates over the coming years, we will be pushing up against these limitations trying to build the necessary infrastructure of tomorrow.

It will be exciting to see what we are able to build in the years to come.

On behalf of our client portfolio management team, thank you for your continued trust and support.