The Congressional Budget Office (CBO) has estimated U.S. debt will equal 202% of gross GDP by 2051, nearly double this year’s level of 102%. Despite higher near-term deficits due to pandemic spending, the CBO has reassured “the risk of a fiscal crisis appears to be low.” Context over time, including the make-up of U.S. debt and that of other large economies, will help gauge the ongoing risks of debt levels this large.
The MSCI Emerging Markets Index underperformed the S&P 500® as sell-offs in large technology-related names in the Consumer Discretionary and Information Technology sectors more than offset strong gains in cyclical sectors led by Financials, Materials and Energy. Health Care names were also a notable drag on performance.
Fixed Income Markets
Fixed income returns continued to be weighed down by rising intermediate and long-term interest rates, extending year-to-date losses for the major indices. Longer-duration sectors were most impacted by the rise in yields, while shorter-duration assets outperformed. In corporate bonds, high yield continued to outperform due to the offsetting impact of higher spreads/yields and lower duration at the index level. Investment-grade returns saw spreads widen modestly amid rising interest rate risks and shrinking order books in the primary market.
Chart of the Week
The U.S. economy added back 379,000 jobs in February, far more than the 200,000 expected, and the unemployment rate ticked down to 6.2%. Employment in leisure and hospitality increased by 355,000 as pandemic-related restrictions eased in some parts of the country. While 9 million jobs have still yet to be recovered from the lockdown-induced recession, we believe a combination of faster-than-expected job growth and healthy consumer balance sheets will be key tailwinds to the economic recovery.