After one-year bull market, “upside potential more limited from here”

Markets fell on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.2 percent and the Shanghai Composite fell 0.9 percent.

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen both appeared before the US House Committee on Financial Services on Tuesday and gave reassuring statements on financial markets.

Yellen said that “while asset valuations are elevated by historical metrics, there’s also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track”, adding that “what’s important is for regulators to make sure that the financial sector is resilient and to make sure that markets work well”.

Powell said that the Fed would taper its asset purchases “when we’ve seen substantial further progress toward our goals” and that “we’ll communicate well in advance of the time of actually tapering”.

Meanwhile, COVID-19 remains a concern as German Chancellor Angela Merkel decided to extend a lockdown until April 18 and called on citizens to stay at home for five days over the Easter holidays.

Brad McMillan, chief investment officer at Commonwealth Financial Network, said that “the third pandemic wave left large parts of the population vulnerable both medically and economically” and the “damage will take time to heal”.

So while Tuesday marked the one-year anniversary of the pandemic bottom in the stock market, analysts are seeing further gains to be relatively muted compared to the past year.

“After an 80% rebound in equity prices since the lows of March 2020, it is fair to suggest that much of the good news is getting priced in and the upside potential becomes more limited from here,” Tobias Levkovich, chief US Equity Strategist at Citi, said in a note.