Shares of banks and other financial institutions ticked up as investors rotated into value sectors, which have not risen as sharply in recent years, from growth sectors such as technology.
Investors are realigning portfolios for an inflationary stage in the economic cycle, something which is likely to cause "bumpy" stock-market moves, according to one strategist. "For the last year or so, everything has been done to get economic growth," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. "So monetary and fiscal policy were all pushing in one direction, without the discussion of the cost [to those policies], which is inflation, or who pays for it, which means taxation.
"Now we're actually getting economic growth, and the discussion is: 'Does it cause inflation, do we get too much growth and who pays for it?'"
Some of the stock-market volatility is a response to a slightly less dovish tone from some Federal Reserve officials. Federal Reserve Bank of Dallas President Robert Kaplan advocated again for consideration of "tapering," the practice of gradually retreating from bond purchases. Federal Reserve Chairman Jerome Powell has warned about elevated valuations in some markets. "Those are words; words are very different to actions," said Mr. Schutte, of Northwestern Mutual. "To me, the Fed is not going to change their action. The Fed's not going to stop doing what they're doing even if they have concerns about equity markets being overvalued."
Investment firm KKR & Co. reported a $1.67 billion profit before preferred dividends in the first quarter, swinging from a loss, thanks to higher investment income and revenue. Rival Apollo Global Management reported a first-quarter profit of $678.9 million, helped by a sharp increase in the value of its investment portfolio.
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(END) Dow Jones Newswires