Stocks Are Heating Up

In keeping with its historical performance, April has started off white-hot. We ended March, and Q1 for that matter, with more questions than answers.

But April 2021 started with a blowout jobs report, and the indices haven't looked back since. Right now, the S&P 500 is at yet another record, the Dow is just about at a record, and we've seen a furious comeback for Big Tech and growth stocks.

The sentiment is certainly better now than it was just a couple of weeks ago. However, I implore you to remember that every month in 2021 thus far has started off hot and saw a pullback/volatility occur in the second half of the month.

Think about it. In January, we had the GameStop trade spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell's comments that rubbed people the wrong way. These concerns won't just disappear because we want them to. If we could make things magically disappear, COVID would've been over yesterday.

But, as I mentioned before, April historically is a strong month for stocks. According to Ryan Detrick, chief market strategist at LPL Financial, "Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April."

During April, the S&P 500 has gained in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

The market concerns, though, are still intact. We still have to worry about inflation, bond yields, and stocks peaking. According to Binky Chadha, Deutsche Bank's chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months.

Another thing I'm a bit concerned about is the $2 trillion infrastructure plan. While this is great for America's crumbling infrastructure, do we really need to spend any more trillions?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes. Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it's still a tax hike.

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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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