It is hard to believe that the first quarter of 2021 is in the books! Looking back, this quarter has definitely been a mixed bag. It started well only to experience a mild correction coupled with one of the largest rotations we have seen in some time. You all know from past e-mails that a market correction usually occurs when stocks are overvalued. The market is fantastic at correcting itself and making sure stocks trade more to fundamentals or trade more within a range reflecting their true value as opposed to being overpriced. Corrections, normally a 5-10% market pull back, can cause concern and are not fun to experience but are perfectly normal and actually very healthy for the market in the long run.
A rotation occurs when during a recovery, such as we are witnessing now, money moves from one sector of the market to other sectors of the economy. As mentioned in other communications, the current recovery was primarily driven by the FAANG stocks; Facebook, Apple, Amazon, Netflix and Google. Many in the financial industry felt that for some time these stocks have been overpriced. What we have seen in March is a rotation out of these stocks into small cap, value stocks, international and emerging markets. This is very healthy in that the recovery is becoming more broad based and not concentrated in just a hand full of stocks. A broad based rotation takes time and does not happen overnight. This is why the performance of our accounts has been flat to begin the year. .
Many are concerned with the policies coming out of Washington when it comes to all the debt and stimulus that is being pumped into the economy. No question a lot of that money will find its way into the stock market. This will lift the stock prices for a while and then reality such as inflation and interest on the national debt will someday be issues we will need to address. Just know that here at Global View Capital Management, we have strategies that will simply follow the money regardless of what the economic conditions may throw at us. We are always watching and will make adjustments as the economy dictates.