Blog COVID-19 Month in Reveiw

Month in Review: May 2021

Quick Takes

● Heavyweight bout. Much of May was a battle between rising inflation fears and growing optimism from the U.S. economic recovery. Overall, though, the data points to an economy, and corporate earnings picture, that remains in an upswing.
● All’s well that ends well? There were no corrections in May, but trading was choppy. In both the second and third weeks of the month the S&P 500 traded more than ‐4% below the May 7th all‐time high, yet closed May just ‐0.7% off the record. In 11 of May’s 20 trading days, VIX was above 20 but ended at 16.8.
● Everybody’s still a winner. For the second straight month all major asset classes had positive returns, although May’s gains were more modest. Both U.S. and developed international equities are up double digits in 2021, and U.S. real estate is up +18.1%.
● Fixed income was flat. Bonds rose in May, but just barely. The best performers were Treasury‐inflation protected securities (TIPS) and investment‐grade bonds. After a rapid rise in Q1, the 10‐year Treasury yield spent April and May almost entirely in a range between 1.5% and 1.75%, closing May at 1.58%.

Asset Class Performance

May was defined by positive, yet modest, gains for all major asset classes. International developed and emerging market equities led in May. International bonds also finished ahead of U.S. bonds as the U.S. dollar fell further.

Vaccinations & Improving Economy Have Investors Smiling

COVID‐19 trends continue to make material improvements on virtually all fronts. The U.S. has administered over 295 million vaccines, with more than 40% of the population now fully vaccinated. The 7‐day average of new positive cases has declined to the lowest levels since the start of the pandemic and are now down ‐94% from their January highs. The 7‐day average of deaths per day is now under 400, ‐88% from their January highs. The percentage of positive COVID‐19 tests in the U.S. fell below 2% for the first time, a new pandemic low. With all the progress on the vaccination and COVID‐19 case fronts states and businesses began to fully reopen. That has resulted in a U.S. economic recovery unlike any in recent history. Consumers have trillions in extra savings and stimulus funds, banks have amassed capital, business are eager to hire and restock inventories, and new businesses are being established at the fastest pace on record. That all has investors in an optimistic mood. Rather than “Sell in May and Go Away”, investors sent the S&P 500 to new all‐time highs on May 7th while the Cboe VIX volatility index fell to 16.7, near its lowest levels since early 2020. But the remainder of May was a battle between the bulls and bears as the speed of the recovery led to bouts of inflationary scares and shortages of goods, raw materials, and workers. Private sector wages and salaries are up a staggering +19.4%in the past year and are now +5.5% above pre‐COVID levels. Consumer spending was the biggest driver of real GDP growth in Q1, including spending increases for motor vehicles and parts that increased +66.2%, durable goods that rose +48.7%, and food services and accommodations

that jumped +26.6%. Gains like those, even off the extraordinarily low bases from the depths of last year’s COVID lockdowns, are bound to create inflation concerns. U.S. stocks pulled back more than ‐4% from the May 7th all‐time highs in both the second and third weeks of the month, and VIX volatility spiked to about 28 and 26 on each of those declines. But in the end the bulls took the victory as investors pushed aside the inflation fears in favor of recovery optimism. The S&P 500 rose +0.7% to post its fourth consecutive positive month, and sixth of the past seven. The small‐cap Russell 2000 index, which is more leveraged to the economic reopening, posted its eighth straight positive month for the first time since 1995.

Importantly, vaccination rates in Europe have picked up after a relatively slow start. That has helped Eurozone economic sentiment improve for four straight months and hit its highest level since 2018.The COVID crisis in India has also made much needed progress with over 190 million vaccines so far administered–only behind the totals of US and China. As a result, those economies are also rebounding nicely. As seen in the chart above, both developed and emerging international PMIs are rising and are well into expansion levels (above 50). The MSCI EAFE Index gained +3.3% in May, outperforming U.S. stocks for the first time in 2021.

Bottom Line: Global equities rallied for the sixth time in seven months as vaccinations helped accelerate the recovery for most countries. Ongoing fiscal stimulus and improving earnings also boosted investor confidence.

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©2021 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.

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”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.



Tax Filing Need-to-Knows for 2020

Have you filed your 2020 taxes yet? We know it can be overwhelming doing your taxes in general and with 2020 being the year of the pandemic, there are even more questions surrounding this year’s tax season and Tax Day. Our advisors are here to help – check out answers to some of the most-asked questions of this year:

  • Are Stimulus Checks Taxable? They’re not considered taxable income. Because they’re an ‘Economic Impact Payment’, the IRS doesn’t count it toward your income. They will still need to be reported on this year’s taxes though and can be filled out on the new entry in the 1040 form.
  • How will unemployment affect my taxes? Unemployment is considered taxable income, so even though the government increased typical weekly unemployment payments, you will still owe taxes on any benefits you received.
  • Last year, tax filings were delayed. Will that happen again this year? The deadline has been extended to May 17th.
  • What happens if I deferred my college loans, rent payments, or mortgage payments? You will not be penalized for this and will not need to take it into consideration when filing this year.
  • If I worked from home in 2020, can I claim deductions for my home office expenses? Unfortunately, you cannot deduct those unreimbursed costs because the Tax Cuts and Jobs Act eliminated those deductions through 2025.
  • What if I owe money for my taxes but can’t pay? You can ask the IRS for a payment plan. The IRS offers different types of installment plans to fit what works best for you.

If you haven’t started yet, here is a helpful checklist you might need to complete the job:

  • Personal Information – 2019 Taxes from State and Federal, Social Security Number
  • Income Information – Including your W-2 forms and 1099 forms
  • Deductions – Including Retirement Account contributions, educational expenses, medical bills, property taxes or mortgage interest, charitable donations, classroom expenses, and state and local taxes.
  • Credits – Child Tax Credit, Adoption Expense Information, First Time Homebuyer Tax Credits, etc.

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