Monthly Market Recap: June 1, 2021

May Market Recap

June 1, 2021

Sometimes, “boring” is what investors need most.

The stock market was short on surprises in May as most of the recent financial trends remained in place. The final few weeks of quarterly corporate earnings continued to exceed consensus estimates. The latest economic data painted the clearest picture yet that inflation is taking hold. And, thankfully, the progress Americans have made toward national vaccination goals led to fewer restrictions and more consumer spending.

The S&P 500 drifted slightly higher in May, the sixth time it has done so in the last seven months (ho-hum). The Dow posted the best performance of the three major equity benchmarks. The NASDAQ fell 1.5%, although Growth stocks actually outperformed Value in the final two weeks of the month.

Seven of the 11 sectors in the S&P 500 booked gains in May, led by Materials (+5%), Energy (+4.9%), and Financials (+4.7%). Consumer Discretionary (-3.9%) and Utilities (-2.8%) performed the worst.

Index May 2021 YTD 2021
Dow +1.93% +12.82%
S&P 500 +0.55% +11.93%
NASDAQ -1.53% +6.68%

If anything caught the market by surprise in May, it was the latest jobs report. The US economy added 266,000 jobs in April, nowhere near expectations of 1 million or more.  Many placed the blame for slower job growth on a shortage of workers and supply-chain bottlenecks. The national unemployment rate ticked higher to 6.1%.

Relative to expectations, corporate earnings have rarely been better than they are right now. More than 85% of S&P 500 companies beat consensus earnings-per-share forecasts in the first quarter, the highest percentage since data research firm FactSet began tracking the information in 2008.

The most-cited inflation gauge, the Consumer Price Index (CPI), has increased 4.2% from a year ago. That’s the fastest rate of inflation in more than 12 years.  A separate measurement of inflation tracked closely by the Federal Reserve (the core personal consumption expenditures index) has risen 3.1% year-over-year, well above the Fed’s 2% target.

At this point, accelerating inflation is undeniable. It remains up for debate whether such forces will be “transitory,” as Fed Chair Jerome Powell suggested, or turn out to be stickier. So far, financial markets have digested the reality of inflation without much incident, a sign perhaps this has been long expected.

The steady stream of data revealing meaningful inflation finally jumpstarted gold prices, which gained nearly 8% last month. Gold had remained stubbornly low for much of the year, causing some to wonder whether cryptocurrencies had taken its place as a true inflation hedge.

The theory of crypto as “digital gold,” however, failed a major litmus test last month. Bitcoin fell 35% in May amid speculation of looming government regulation.

National efforts to vaccinate Americans against COVID-19 have led to real progress. The daily US death rate (7-day average) fell below 500 last month. In 22 states, more than 65% of the adult population has received at least one dose of the vaccine.

With a growing number of people vaccinated, numerous states have lifted mask mandates and eased social distancing guidelines. Better public health and fewer restrictions both lead directly to a stronger economy.

We got relatively few developments in political negotiations surrounding President Joe Biden’s proposed infrastructure spending. Biden has suggested increasing both the long-term capital gains rate (on Americans earning more than $1 million per year) and bumping the highest marginal income tax rate back to 39.6% (from 37% currently), though neither elicited much change from Republicans.

Small-cap stocks were mostly flat as the Russell 2000 returned 0.1% in May. International equities outperformed, especially Non-US Developed Markets, which gained 3.5%. Emerging Market equities were up 1.7%.

Crude oil prices finished the month just below $67 per barrel, their highest mark since October 2018.

10-year US Treasury yields stayed steady, closing the month little changed at 1.58% (compared to 1.63% a month earlier).

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.