Equity markets drove to near record-highs this week, with confidence restored that markets were functioning properly from last week’s retail trading frenzy. The upheaval experienced with several stocks followed by large groups of investors on social media boards eased, and strong earnings reports from major components of the S&P 500 boosted sentiment. Adding to the enthusiasm, unemployment claims applications dropped to the lowest levels since November, with employers cutting less jobs than forecast and more hiring reducing the ongoing claims. Perhaps most importantly, COVID cases are beginning to drop dramatically from the holiday surge, with a combination of less traveling, vaccinations, and policy actions cutting the caseload and easing hospital constraints. Daily new cases are half what they were just a month ago, and over 30 million Americans have received the vaccine, with the rollout gaining pace. If the trajectory can hold, the US could see the majority of Americans vaccinated in the coming months, and herd immunity achieved later this year. At the same time, Washington is continuing to negotiate another round of stimulus measures to help bridge the output gap, as scarring from the pandemic remains deep and many millions of Americans face ongoing financial troubles. Corporate bankruptcies also remain elevated, dominated by real estate and consumer-facing service companies. The transition from a COVID-led shutdown to a powerful reopening will not be quick or easy. However, all signs continue to point to an economic rebound in the making, as financial conditions remain encouraging, the employment picture is firming, and the service economy is starting to reopen as vaccination gains pace and COVID restrictions ease. While plenty of pain is still evident across the economic spectrum, we believe on balance there is reason to be optimistic about the months and years ahead. The likelihood of a sustained, lengthy expansion like the last one, however, is low in our view. Given current equity valuations, likely regulatory and tax headwinds ahead, and the lack of significant restructuring and economic rebalancing during this crisis by the stimulus offsets, we anticipate the new cycle to be less robust and returns to be lower going forward. Generating significant returns in a low-growth, zero interest rate world creates many challenges, and our perspective is that maintaining a global, actively-managed portfolio that can exploit tactical opportunities is required to meet long-term goals in today’s markets. Particularly with returns net of inflation on government bonds negative, simply maintaining purchasing power is difficult with relatively safe assets. The dip last week presented a minor opportunity to add to stocks that sold off without any connection to the retail mob that created a risk-off mood across markets. While the drop was the largest in months, we did not make meaningful changes to the allocations, as we believe more significant price fluctuations may be ahead where it could be more advantageous to deploy capital. Our preference remains to hold high-quality companies with strong growth prospects at the core, as well as lean into risk in the short term through exposures to small cap and cyclical stocks and emerging market equities. As always, we continue to remain extremely focused on monitoring unfolding market dynamics and reacting only when appropriate. Please feel free to call our office with any questions you may have.