The Bottom Line
● Stocks rallied during the week to close within 1% of their all‐time high. The S&P 500 gained +1%, but small cap Russell 2000 and tech‐heavy Nasdaq led with gains of
+ 2.4% and +2.1% respectively.
● On Friday, the U.S. Department of Commerce reported that the core personal consumption expenditures price index, the Fed’s favorite inflation measure, surged +3.1%year over year in April, its fastest rise since 1992.
● Despite the higher than expected rise in inflation, bond yields backed off from last week’s levels, with the yield on the U.S. 10‐year Treasury note falling ‐3 basis points to 1.59% after being as low as 1.55% on Monday.
Stocks nearly back to record highs
U.S. stocks rallied during the week as the S&P 500 gained+1.2% to closed just ‐0.7% from its May 7th all‐time high of 4,232. Growth stocks in the Communications Services and Information Technology sectors along with the cyclical sectors of Industrials and Materials led the way. The choppy trading that marked much of May subsided in the final week as the Cboe Volatility Index (VIX) fell to 16.7, down from 20.2 last Friday, and marking its lowest level since April 16. A key inflation indicator, the core personal consumption expenditures price index, rose +3.1% from April of 2020, faster than expectations of +2.9%, and the biggest increase since 1992. Despite the inflation surge, bonds still managed to stay positive for the week. After testing the bottom of its recent trading range at 1.55% on Monday, the yield on the 10‐year U.S. Treasury note ended the week at 1.59%, down 3 basis points from the prior Friday. So called “meme stocks” had a surprise revival during the week, fueled by traders in Reddit’s WallStreetBets forum, with names like AMC Entertainment more than doubling in price. Meanwhile in Washington, President Biden proposed the largest U.S. budget since World War II, with a $6 trillion price tag.
Digits & Did You Knows
HEY BIG SPENDER — 59% of US households made a “large purchase” during the first 4 months of 2021, i.e., January 2021 through and including April 2021, the highest percentage reported in 5 years. “Large purchases” include furniture, home repairs and automobiles (source: Federal Reserve Bank of New York, BTN Research).
ROADTRIP — U.S. drivers are projected to use 9.0 million barrels a day of gasoline during the summer of 2021, up from 7.8 million barrels a day of gasoline used during the 2020 “pandemic‐summer”, but still down from 2019’s 9.6 million barrels a day of gasoline consumed (source: Energy Information Administration, BTN Research).
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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
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