Hello Spring and Economic Recovery

It’s Spring andeconomic recovery is in the air.

Last week, the Bureauof Economic Analysis reported the U.S. economy grew at a 6.4 percentannualized rate for the first three months of 2021. While that’s goodnews for companies and workers, asset managers are checking their expectations.

The stock marketreflects what investors think may happen in the future. During the past year,major U.S. stock indices moved higher as investors anticipated vaccines andeconomic recovery, reported Patti Domm of CNBC. Since its March 2020low, the Standard & Poor’s 500 Index has gained 88 percent.

Amidst strong signsof recovery in the United States, some asset managers are positioning for“inflation and tapering,” according to a source cited by Naomi Rovnick of FinancialTimes. “Investors have topped up their cash holdings at the fastestrate since March 2020 as debate intensifies over whether stock markets willcontinue rallying now the U.S. economic recovery from the pandemic is firmlyunder way.”

Investors werefeeling cautious last week, but there were no signs of tapering, which occurswhen the Federal Reserve begins to buy fewer bonds. On Wednesday, the Fed leftits supportive policies in place.

When the Fed beginsto change course and rates move higher, equity market valuations may adjust.“The main worry for stocks is that higher bond yields translate into lowerequity valuations. Higher yields reduce the current value of future profits andtherefore can reduce earnings multiples,” reported Jacob Sonenshine of Barron’s.

Profits were strongduring the first quarter of 2021. U.S. companies continued to reportexceptional earnings last week. With 60 percent of firms in the Standard &Poor’s 500 Index reporting, the blended earnings growth rate was 45.8 percent.More than 8 of 10 companies have reported better than expected earnings,reported John Butters of FactSet.

Major U.S. stockindices finished the week flat to down. Rates on 10-year Treasuries edgedhigher.

Best regards,

Womack Investment Advisers, Inc.

WOMACK INVESTMENT ADVISERS, INC.

Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Website: www.womackadvisers.com

Womack Investment Advisers, Inc. (WIA) is a registered investment adviser whose principal office is located in Oklahoma. Womack Investment Advisers, Inc. is also registered in the State of California, the State of Illinois, the State of Indiana, and the State of Texas. WIA only transacts business in sates where it is properly registered, or excluded, or exempted from registration requirements.

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