Dear Friends,

Welcome to a New Day in America. We all wish President Biden much success as his success will be our success as Americans.

U.S. stocks have continued to climb amid optimism about a vaccine-led economic recovery and a generous stimulus plan, but it’s a narrow path—buoyant investor sentiment could easily be deflated by bad news. Although global economic growth has struggled, an acceleration in vaccinations in major countries could support stronger growth in the second quarter.

Biden’s generous $1.9 Trillion stimulus plan is designed to support households and businesses through the pandemic. It calls for direct payments of $1,400 to most Americans, bringing the total relief to $2,000, (including December’s $600 payment). It will also increase the federal per week unemployment benefit to $400 and extend it through the end of September. He will also give $350 Billion in state and local government aid. $50 Billion will go toward COVID-19 testing and $20 Billion toward a national vaccine program in partnership with states and localities. The plan is the first of two major spending initiatives Biden will seek in the first few months of his presidency.

Meanwhile, after months of languishing near record lows, 10-year Treasury yields have risen to their highest level since March 2020, as the bond market focuses on the potential for stronger growth and higher inflation in 2021. Rising yields mean losses in those portfolios, something we have been warning about for months.

Optimism remains strong for an economic rebound, as COVID-19 vaccinations continue to roll out and the Federal Reserve remains “accommodative.” However, with the pace of vaccinations lagging original projections and the virus continuing to spread at record and alarming rates, growth will likely struggle in the near term. Ultimately, herd immunity still represents the light at the end of the tunnel, but the immediate path forward is darkened by efforts to mitigate the spread of the virus at this time.