C2 The BulleTin • Sunday, March 21, 2021
Good news for the economy can be a drag on your 401(k)
BY STAN CHOE
The Associated Press
NEW YORK — A huge shift
is underway within the stock
market, one that might roil
your 401(k) in the short term,
but one that many professional
investors also see leading to
longer-lasting gains.
A surge of optimism that the
pandemic is on the way out has
convinced investors to revamp
their playbooks for where to
put money. Most stocks across
the market are rising, with the
biggest gains coming from
companies that would benefit
most from a healthier economy,
such as airlines and banks, af-
ter they got pounded lower for
much of the pandemic.
But all the hope at the same
time is forcing a climb in bond
yields, which in turn is send-
ing a group of tech stocks back
to earth after they carried the
market for much of the pan-
demic. When bonds pay more
in interest, investors are less
willing to pay as high prices for
stocks seen as the most expen-
sive or to wait as long for their
big growth forecasts to come to
fruition.
Because of the way stock in-
dexes are calculated, any weak-
ness for the biggest stocks can
mask strength that’s sweeping
across the rest of the market.
It’s why the S&P 500 is up less
than 6% so far this year: Energy
stocks have soared more than
38% and financial stocks have
stormed about 17% higher, but
tech stocks, which account for
more than one-quarter of the
index’s market value, rose less
than 2%.
All that churning underneath
the surface may sound inside
baseball, but it has a big im-
pact when 401(k) accounts are
tied more than ever to the per-
formance of the S&P 500 and
other indexes. More than half
the dollars in U.S. stock funds
are directly mimicking indexes,
according to Morningstar.
In other words, your 401(k)
could fall even if the economy
— and the majority of stocks
in the market — are rising. It’s
the mirror-image of what hap-
pened early in the pandemic,
when the S&P 500 powered
higher even though the econ-
omy was falling into a terrifying
pit. And professional investors
say this rotation among sectors
still has room to run.
“It brings me back to busi-
ness school, where we learned
about how all the indices are
different,” said Lamar Villere, a
portfolio manager at Villere &
Co. in New Orleans. “It seems
so boring and academic, but
there is not one monolithic
thing called the stock market.
It’s these hugely different areas
of the market that are moving
differently.”
Investors have already felt the
moves in recent weeks, when
expectations for coming in-
flation and economic growth
suddenly hit an upswing as
COVID-19 vaccines rolled out
and Congress neared its $1.9
trillion economic rescue.
The Nasdaq composite tum-
bled more than 10% from Feb-
ruary 12 through March 5,
with its many tech stock hold-
ings hurt by the sudden rise in
yields. The S&P 500 also fell
over that span, down 2.4%,
but more than half the stocks
within the index were rising
during that time.
Marathon Oil and other en-
ergy producers led the way,
with several up more than 20%.
Cruise-ship operators were
also steaming much higher. If
the economy does roar back
soon, as nearly everyone on
Wall Street is anticipating, prof-
its should jump much more
for those types of companies
than for big tech stocks, which
had actually benefited from the
stay-at-home economy.
That’s why if the S&P 500
falls because of drops for a just
a few heavyweight companies,
Equity
Continued from C1
“Consumers spoke up for ra-
cial justice, and they demanded
that the brands they patronize
do the same,” Chatterjee said.
Companies have also faced
a push from employees. Whole
Foods was sued by employees
for barring them from wearing
Black Lives Matter face masks
because its dress code prohib-
its visible slogans or messages
(afederal judge later dismissed
most of the lawsuit).
Adidas was the target of
complaints that it lacked racial
diversity. The sportswear com-
pany responded with plans to
fill 30% of new positions with
Black and Latino candidates
and to invest $120 million
to address racial disparities
through 2025.
Adidas says it’s donated $2
million to a small business
fund created by Beyonce’s
BeyGOOD initiative and the
NAACP. And it plans to give
an additional $10 million to
that or other initiatives and $2
million in scholarships to Black
and Latino students within
three years. The company,
though, has yet to disclose the
percentage of Black and Latino
candidates it’s hired since its
pledge to diversify its ranks.
Others, like Facebook and
the cosmetics company Estée
Lauder, have also vowed to
increase the number of Black
employees in their workforces
or leadership positions.
“Companies are actively
marketing to source great tal-
ent and retain the best employ-
ees,” Chatterjee said.
Yet any sudden burst of
giving from companies not
known for donating to racial
Wage gap
Continued from C1
Another challenge to going
back to work is finding child
care. Child care openings are
far scarcer than they were be-
fore the pandemic. It is also
unaffordable for many fami-
lies unless it is subsidized by an
employer, the state or federal
assistance.
Finally, COVID-19 has bur-
dened women and families
with debt. If they were lucky,
they received unemployment
and federal stimulus money.
But the hole is deep for many
families and will take years to
dig out.
The good news? COVID-19
could be an opportunity to
make profound advancements
in increasing women’s earnings
and placement in leadership
positions.
Jim Mone/AP
A group of protesters march Monday in the snow around the Hennepin County Government Center in Min-
neapolis where the second week of jury selection continues in the trial for former Minneapolis police officer
Derek Chauvin. Chauvin is charged with murder in the death of George Floyd during an arrest last May.
justice causes isn’t without risk.
Marlette Jackson, a diversity
director at Virgin Pulse, part of
the Virgin Group conglomer-
ate, says consumers will have to
decide for themselves whether
a company is contributing to
equity causes as an expression
of its values or is merely trying
to appease customers and em-
ployees.
At the same time, experts
say, there’s no consensus on
how to define racial equity giv-
ing. They also note that track-
ing the contributions can be
difficult. Typically with corpo-
rate philanthropy, unlike with
foundations or public charities,
details tend to be sparse. And
Candid said it’s unclear, at least
from initial announcements,
where about $3.7 billion is go-
ing.
Well-known organizations
like the NAACP Legal Defense
and Educational Fund and
the National Urban League
and historically Black colleges
and universities have received
some portion of the corporate
donations. But determining
how many or which Black-led
organizations are actually ben-
efiting can be hard because
tax filings for nonprofits don’t
include racial identifiers, said
Shena Ashley, head of the Ur-
ban Institute’s Center on Non-
profits and Philanthropy.
“I have all the data that we
have in the nonprofit sector,”
Ashley said, “and I still don’t
know the number of Black-led
organizations that exist in the
United States.”
Still, JPMorgan has commit-
ted $2 billion over five years to
support the recovery of Black,
Latino and other underserved
communities. The company
says at least $42.5 million in
grants and low-cost loans will
help expand its Entrepreneurs
First, employers who are
willing to seek out women
and women of color can build
exceptional leaders by hiring
through the lens of qualifica-
tions that reflect resilience and
innovation, rather than direct
experience in an industry. And
as COVID-19 changes career
paths for so many, there is no
better time to find new, un-
tapped or overlooked women
who are ready to rise to the oc-
casion.
Second, sponsoring women
in your network is critical. This
is different than mentoring.
Mentors talk to you; spon-
sors talk about you. The data
around sponsorships is com-
pelling. U.S. women with a
sponsor earn more than their
counterparts without one, ac-
cording to research from Pay-
Scale. Even more interesting
is the power of male allyship
in this regard. Female prote-
ges with a male sponsor earn
14.6% more than women with
a female sponsor — a good
way to bridge the gender wage
gap past COVID-19.
Abrams puts it this way:
“Women and diverse teams
perform better, so ensuring
your workforce is diverse in
gender, ethnicity and race will
help you be more profitable
and innovative.”
She adds, “In addition,
women score higher in nearly
all the top leadership skills, and
if the pandemic has proven
anything it is that women are
experts at juggling work and
family. We are exhausted, and
yet we have persevered.”
e e
of Color Fund, which helps
minority-owned businesses at-
tract capital.
Other large commitments
are coming from banks like
Citi, PNC, Bank of Amer-
ica and Goldman Sachs. The
first three have each pledged
investments of $1 billion or
more toward homeownership
and other financing. Goldman
Sachs says it will give $100 mil-
lion as part of a 10-year $10
billion investment to advance
racial equity and economic op-
portunities for Black women.
Citi’s CEO Michael Corbat
said that closing the racial
wealth gap and addressing rac-
ism is “the most critical chal-
lenge” in creating an inclusive
society. Citi says it’s donated
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Wall Street should take it in
stride. Many analysts and pro-
fessional investors expect the
improving economy to boost
profits for companies enough
to more than make up for any
stumbles caused by rising rates
in the near term, and they ex-
pect the S&P 500 to climb
higher over the next year.
Since their recent tumble,
tech stocks have come back as
worries about inflation have
been tamped down a bit. The
revival for tech stocks helped
the S&P 500 return to a record
on Monday. And even if the
shine never fully returns to tech
stocks, many are continuing to
produce huge profits that sup-
port their stocks, such as Apple
and its nearly $29 billion in net
income last quarter.
But many professional in-
vestors nevertheless expect the
rotation out of tech stocks and
into other beaten-down areas
of the market to continue for
a while longer. Tech and high-
growth stocks continue to look
much more expensive than the
rest of the market, and higher
interest rates make that gap
look more glaring. That could
keep the pressure on the S&P
500 and index funds that track
it.
High-growth stocks had
been largely pulling away from
their more cheaply valued ri-
vals, called value stocks, for
much of the past 15 years, said
David Joy, chief market strat-
egist at Ameriprise. Over the
long term, a reversal could last
just as long.
Of course, within such long-
term trends, the market can
swing back and forth in mo-
mentum several times. For this
most recent move into value
stocks and out of high-growth
tech stocks, Joy said he thinks
there’s likely months left to go.
“If I had to guess, it’s halfway
to maybe two-thirds done,” he
said, “but it’s still the place to
be.”
$25 million in profits from its
participation in the govern-
ment’s Paycheck Protection
Program to the company’s
foundation, which plans to give
it to nonprofits assisting mi-
nority-owned businesses.
The racial disparities in
wealth — the typical Black
family holds just one-eighth
the wealth of a white fam-
ily — are a common theme
expressed by financial indus-
try executives. PayPal, for ex-
ample, pledged $500 million
to create a fund for minority
businesses that will help “drive
financial health, access, and
inter-generational wealth cre-
ation.” And Netflix says it
wants to help reduce the racial
wealth gap by putting 2% of its
cash holdings into financial in-
stitutions that directly support
Black communities.
Shelley Stewart III, a McK-
insey partner who leads the
company’s research on Black
economic mobility, said he’s
struck by the “number of com-
panies jumping into the fray
and recognizing that they’ve
been part of the problem and
not yet part of the solution.”
Still, while well-known civil
rights and social justice orga-
nizations and HBCUs have
drawn the interest of donors,
Ashley, of the Urban Institute,
says it remains unknown how
much funding smaller com-
munity-based groups will re-
ceive. Donors are still learning
about organizations “beyond
the top players,” she added.
Another difficulty is mea-
suring the success of the
philanthropy, the results of
which can take years.
“If the emphasis is on ad-
dressing the root causes of ra-
cial inequities and eliminating
differential outcomes,” said
Leslie Pine, a managing part-
ner of the philanthropy advi-
sory group The Philanthropic
Institute, “those things don’t
change overnight.”
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