Equity markets have gotten off to a strong start in 2021, reaching record highs as the U.S. economy continues to recover from the pandemic. Stocks benefited from ongoing vaccination efforts as well as from government stimulus money being distributed to individuals, businesses, and local governments. The bond market, which benefited last year as interest rates dropped to near zero as the economy slowed, declined as interest rates rebounded with the improving economy.
We are in a very interesting time right now. The U.S. economy is recovering, but it is not an equal recovery across the board. Lower wage industries, who bore the brunt of the economic slowdown last year, have been much slower to recover. Likewise, minority and female employment remains more depressed and slower to recover. As of now, the economic recovery continues to be dependent on fiscal and monetary support. We need to see a broader recovery to allow economic growth without the use of government help.
There is an old adage in the stock market that things are either getting better, or they are getting worse. When they are getting better the stock market goes up and when they are getting worse, the stock market goes down. Right now, things are undeniably getting better, and we are seeing the markets rise as a result. Economic growth is accelerating, unemployment numbers are down, corporate earnings have been higher than expected, and retail sales are rebounding. Nationally, individuals are using their stimulus checks to pay down debt, fund purchases, and add to their savings. In the short-term, giving money away does help the economy.
On a longer-term basis, however, we are very concerned about the rising level of debt the U.S. Government is accruing. Government debt is not always a bad thing, and in fact is necessary and healthy for the country. Unbridled spending with no long-term plan is not a healthy thing. There seem to be those who believe we can eliminate recessions and economic downturns by sending checks to people and businesses, and now even to cities, towns, and counties, whenever the economy slows. We are less concerned about stimulus dollars being used to recover from the pandemic and are more alarmed that we were running trillion dollar deficits when the economy was in good shape before the pandemic. While there are definitely hardships that can and should be addressed, the debate over who is responsible for them is an important one. This seems to be a slippery slope and once it becomes normal, will be difficult to step back from. It will be fascinating to see how this plays out in the future.
While vaccinations in the U.S. have been great and will be what allows us to get back to a normal way of living, it is important to understand that the pandemic will not be over until Covid is defeated globally. New waves of the disease can lead to new variants that threaten the global recovery. While optimistic, caution and vigilance remain.