The markets snapped back last week, as the Dow (+3.9%), NASDAQ (+6.0%), and S&P 500 (+4.7%) more than recovered their losses from the prior week. Small caps performed even better, as the Russell 2000 small cap index gained nearly 8% last week. The NASDAQ and S&P 500 are back in record territory, and the Dow is only a few points from its historical highs. Taxable bonds fell almost 1% last week, as bond yields rose with concerns that inflation may be around the corner, despite most pundits feeling that inflation will remain tame for at least another year. Tax free municipal (muni) bonds continued their rally, as they gained nearly 1% last week.
Unlike the prior week that was riddled with news surrounding a handful of stocks (such as Gamestop), reality set in and investors began to focus again on corporate earnings data, which has continued to provide strong numbers. Manufacturing data also shows that the US and other countries around the world are continuing to recover from the short recession in 2020. However, the jobs data from late last week showed that the rate of job increases is slowing. Of course, one would think that’s bad news, but that data further substantiates the government’s stimulus package, which seems to be closer to being signed. That stimulus package is expected to be good for small caps (hence, their recent rally) and for municipalities (hence, the continued rise in tax free muni bonds).