This Weekly Market Update reviews the top market headlines: Fed Officials Raise the Prospect of Tapering, Leading Indicators Surpass Pre-Pandemic Peak, Corporate Earnings Rebound at a Hearty Pace
  • The Federal Reserve is currently purchasing $120 billion of bonds per month
  • The U.S. Leading Economic Index increased by 1.6% in April, hitting a new peak
  • Q1 2021 S&P 500 company earnings are expected to have grown 51.9% over the prior year

Top Three Market Headlines 

Fed Officials Raise the Prospect of Tapering: According to minutes released last week of the Federal Reserve’s April 27-28 meeting, the topic of reducing the pace of the central bank’s asset purchases was raised for the first time since the Fed adopted its current accommodative monetary policy. Presently, the Fed is purchasing $120 billion of bonds per month while maintaining a federal funds rate target range of 0 to ¼ percent. With indicators of economic activity strengthening, however, some officials suggested it might be appropriate for the Fed to discuss in upcoming meetings a plan to pare back, or “taper”, its bond purchases if the economy continues to make rapid progress toward the Fed’s goals of a 2% average inflation rate along with full employment.

Leading Indicators Surpass Pre-Pandemic Peak: The Conference Board’s U.S. Leading Economic Index (LEI), a series of 10 leading, coincident, and lagging indicators designed to reflect economic cycle turning points, increased by 1.6% in April to 113.3. Following strong growth in March as well, the LEI has now reached a new peak, fully recovering from its COVID-19 contraction. According to the Conference Board, the index’s latest reading indicates the economy’s recovery should continue. The Conference Board has set an expectation of real annualized GDP growth of 8-9% in the second quarter of 2021, with full-year growth of 6.4%.

Corporate Earnings Rebound at a Hearty Pace: Demonstrating the acceleration of the U.S. economy’s post-pandemic recovery, corporate earnings in early 2021 have rebounded at a rapid clip that has far exceeded original estimates. With most Q1 corporate earnings reports now in the books, the year-over-year blended EPS growth rate for S&P 500 companies (combining actual results with analyst estimates for the few companies yet to report) stands at a robust 51.9% as of May 21, more than double the estimate of 23.7% as of March 31. Going forward, analysts presently project double-digit earnings growth for S&P 500 companies for each of the remaining quarters of 2021, producing a full-year growth rate of 33.7%.

As of May 21, 2021 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 0.39% 4.48% 9.25% 44.26%
S&P 500 -0.39% 4.82% 11.29% 43.24%
Russell 2000 -0.41% -0.13% 12.55% 66.22%
MSCI EAFE 1.06% 5.42% 9.08% 42.90%
MSCI Emerging Markets 1.74% 1.25% 3.56% 45.99%
FTSE NAREIT 0.73% 7.02% 16.51% 42.98%
Bloomberg Commodity -1.18% 8.93% 16.47% 44.37%
Barclays U.S. Aggregate 0.07% 0.77% -2.63% -0.47%

CNBC 05/19/21, Conference-Board.org, 5/20/21, Federal Reserve 4/28/21, FactSet 5/21/21; data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.