Moreover, as the U.S. recovery gathers steam, rising interest rates and inflation have emerged as potential headwinds. While absolute levels of interest rates remains low relative to history, the yield curve has steepened materially in the last few months, negatively impacting bond prices directly as well as the valuation of long-term earnings for stocks.

Inflation in the U.S. economy has remained subdued for quite some time, but has recently begun to pick up, and market expectations for such, as reflected in the chart to the right below, have been increasing as the economy reopens and businesses face rising costs in areas such as shipping and raw materials, shipping, and labor.5
The Federal Reserve has signaled a willingness to let inflation run above historical average for some period of time before taking any action, and currently believes that near-term inflation pressures will be transitory, but there is a risk that inflation could run higher than expected and force the Federal Reserve to raise interest rates, which could dampen the economic recovery.
Lastly, markets have also wobbled on discussion from the Oval Office and Congressional leaders pertaining to possible increases in corporate and/or long-term capital gains tax rates.
Conclusion
The economic recovery is undoubtedly growing stronger, with multiple avenues for improvement as the country continues to trend closer to normalcy and the COVID-19 pandemic hopefully fades into the rearview mirror. Of course, as financial markets are typically forward-looking, stocks' robust rebound since their late-March 2020 lows indicates that investors already correctly anticipated today's favorable economic trends. The path from here may be less certain, as investors balance the strength of the recovery with emergent headwinds. As always, investors should remain vigilant and disciplined, and mindful of their asset allocation targets and portfolio exposures.
Sources
1 According to the first estimate provided by the Bureau of Labor Statistics; the final number will be produced in June, 2021
2 As of 4/30/2021
3 A reading above 50 indicates business activity is expanding
4 As of 5/7/2021
5 The 5-year breakeven inflation rate reflects the difference in yields between nominal Treasury bonds and Treasury Inflation Protected Securities (TIPS) for a given maturity