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May Ends on a Positive Note With Inflation Concerns on the Backburner

Market Data as of Week Ending: 5/28/2021 unless noted otherwise

Equities

U.S. stock prices were positive last week as inflation concerns subsided slightly allowing the S&P 500 to seek out a small gain for the month. May was the sixth positive month out of the past seven for the S&P 500. With first quarter earnings exceeding expectations by record numbers, analysts have continued to revise their numbers higher, with 2021 earnings now expected to grow 34% from 22% at the start of the year. Smaller cap companies outperformed their larger cap peers, and for the second week in a row, growth stocks edged out their value counterparts. Cyclical and sensitive sectors such as consumer discretionary, industrials, and communication services were among the best performing sectors, while traditional defensive sectors such as consumer staples, health care, and utilities lagged. Developed foreign stocks in Europe and Asia outperformed U.S. stocks while Emerging Market stocks outperformed both developed foreign and U.S. markets.

Bonds

U.S. Treasury yields remained calm as the 10-year Treasury yield nudged two basis points lower amid a rise in bond prices, ending the week at 1.60%. Results were fairly even across bond segments as lower quality bonds outperformed their higher quality counterparts and longer duration outperformed shorter duration. Investment grade corporate bonds ended the week yielding nearly 2.2% and high yield corporate bonds are yielding over 4.7%.

Macroeconomic Data

Economic data sent conflicting signals last week. The consumer confidence index fell for the first time in six months on inflationary concerns, slipping to 117.2 in May from 117.5 last month. U.S. unemployment claims fell to a new pandemic low of 406,000 as layoffs wane. Durable goods orders fell by -1.3% in April as the computer-chip shortage impacted the transportation sector. Personal incomes fell 13.1% last month in the absence of further federal support. Consumer spending slowed, rising 0.5% in April, as Americans kept a sizable amount of savings on hand. The economic outlook in Europe became more positive as Germany’s Ifo Business Climate Index rose to a two-year high of 99.2 in April, indicating increasing optimism around the state of Europe’s largest economy.

 

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