Stocks, bonds, and commodities rallied in April as the U.S. economy continues to recover from the COVID-19 shutdown as more people are getting vaccinated every day. Pent-up demand along with additional stimulus checks and increased optimism about a post-pandemic world are causing numerous records to be broken. Of course, much of this is just the mirror image of records that were broken to the downside one-year ago.
The S&P 500 index rallied 5.2 percent in April as a majority of corporate earnings have come in better than expected. The yield on the 10-year U. S. Treasury Note dropped to 1.65 percent at the end of April from 1.74 percent at the end of the first quarter, and a barrel of West Texas Intermediate oil rose to roughly $63.65 from almost $59 a month ago.
Not everything was rosy, however, as losses from the massively-leveraged bets-gone-wrong by family office Archegos became public. In total, a few of the biggest global banks lost more than $10 billion as those trades were unwound. While the industry initially touted that this type of behavior was not widespread, some honest reports referred to the losses as a “surprise.” The good news is that this event happened in a healthy market with plenty of liquidity. The bad news is that this is an example of late-cycle behavior comprised of massive leverage in complex and opaque instruments.