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February Market Recap: Stocks Rise on Vaccine, Stimulus Hopes

An accelerating vaccine rollout and progress on stimulus drove stocks higher for the month, overcoming a sell-off in high momentum growth stocks in the final week. Small caps posted strong returns, extending a leadership trend that began in September. Commodities outside of gold rallied, while bonds retreated as concerns about rising debt levels and increasing money supply persist.

Optimism on the Vaccine Rollout

Johnson & Johnson took the final steps to position its COVID-19 vaccine for approval, allowing President Joe Biden to accelerate his timeline for getting shots available for all Americans to May.

New cases in the U.S. have leveled off at a still high rate of 70,000 per day. The coming weeks will be critical as an increasingly vaccinated or previously infected population faces new variants.

Optimism on the vaccination front drove a partial reversal of the “stay at home” trade, with value and physical economy stocks outperforming for the month. Several high valuation stocks popular with retail traders retreated, headlined by Tesla, which is now down modestly for the year.

For some companies, ultra-low interest rates have served as a justification for ultra-high valuations. With interest rates ticking higher, these stocks may face further pressure.

Stimulus Package Nearing Passage

A legislative stimulus packages advanced through Congress and is close to passage. Eligibility for direct stimulus checks is likely to be tightened to an income level around $160,000 for couples.

Still, increased likelihood of passage of a massive bill supported equities.

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Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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