If you made it to the bottom of last month’s newsletter, you might remember seeing: “Historically speaking, April has been one of the better performing months for stocks.”
2021 was no exception as major stock indices soared higher in April. The S&P 500 and Nasdaq each gained over 5% while the Dow Jones Industrial Average was up over 2.5%. As a whole, growth stocks outperformed value stocks, larger companies outperformed smaller companies, and US outperformed international for the month.
Strong earnings reports, encouraging economic data, and a dovish Fed stance helped in propelling markets higher. Of the companies in the S&P 500 that have reported earnings so far, 86% have beat expectations, with an average year-over-year growth rate of 45.8% (the highest growth rate since 2010 when the economy was coming off the financial crisis).
Bond indices also experienced modest gains in general as yields leveled off after a hot start to the year (remember – bond prices and yields are inversely related). The 10-year Treasury bond yield fell slightly from 1.74% to 1.65%, marking its first monthly decline of 2021.
While 2021 has been a relatively positive year for markets thus far, investors remain somewhat cautious amid the potential for rising inflation as well as tax hikes, though these concerns seem to be just background noise for now.
Who let the Doge out? Who, who, who, who, who?
Dogecoin, the now famous cryptocurrency, was created in 2013 as a joke (the digital coin was based on a meme, to poke fun at the the boom of alternatives to Bitcoin).
Fast forward to 2021 and the joke is on everybody else… Through the end of April, Dogecoin had gained over 7,000% in 2021, jumping from $0.0047 to $0.3366 per coin.
Behind the madness is a familiar group – Reddit (remember the GameStop mania earlier this year), as well as Elon Musk’s twitter account.
The Dallas Mavericks even started accepting Dogecoin as payment for tickets and merchandise because “sometimes in business you have to do things that are fun.”
Looking ahead, some retail investors are all-in, but most experts are waiting for the bubble to burst when the music stops.
While the toilet paper shortage of 2020 provided some interesting entertainment value, there is another current shortage with a greater economic impact – chips.
No, not potato chips… computer chips (semiconductors).
As the economy shut down in spring 2020, chip suppliers cut production. However, demand took a different route as individuals loaded up on electronics while stuck at home.
Why is this important?
The chip shortage impacts production in numerous sectors, such as car companies. Many major automakers have lowered sales forecasts, citing bottlenecks in capacity due to the shortage.
Many experts believe this could last at least through the end of 2021.
Broad Market Returns
| Index | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | 5.29% | 13.15% | 12.00% | 46.07% |
| NASDAQ (QQQ) | 5.91% | 7.58% | 7.87% | 55.37% |
| Large Cap Growth (VUG) | 6.91% | 9.75% | 8.64% | 53.52% |
| Large Cap Value (VTV) | 3.44% | 15.85% | 14.93% | 41.75% |
| Small Cap Growth (VBK) | 3.64% | 4.16% | 6.42% | 63.40% |
| Small Cap Value (VBR) | 4.01% | 19.18% | 21.61% | 75.07% |
| Developed International (VEA) | 3.05% | 8.48% | 7.70% | 45.27% |
| Emerging Markets (VWO) | 1.79% | 2.65% | 5.86% | 49.63% |
| REITs (VNQ) | 7.86% | 17.30% | 17.34% | 35.41% |
| Aggregate Bonds (BND) | 0.87% | -1.96% | -2.80% | -0.31% |
| Corporate Bonds (VCIT) | 1.04% | -2.03% | -2.89% | 5.47% |
| High Yield Bonds (JNK) | 0.73% | 1.86% | 1.36% | 16.05% |
| Long Term Treasuries (VGLT) | 2.29% | -8.16% | -11.39% | -15.23% |
| International Bonds (BNDX) | -0.19% | -1.86% | -2.48% | 0.56% |
Fun Facts – May Edition
- Blue jeans were officially invented in May of 1873, after Levi Strauss and Jacob Davis (who?) obtained a patent.
- May is the only month that never begins nor ends on the same day of the week as any other months within any calendar year.
- The Eurovision Song Contest, which started in 1956, is held in May each year. Notable winners include Celine Dion (1988) and ABBA (1974).
- The popular investment adage “sell in May and go away” is a warning for investors to divest their stock holdings in May and wait to reinvest in November. This stemmed from stocks generally performing better from November – April. While the exact reason behind the perceived seasonal anomaly is not known, it was believed to be caused from lower trading volume during summer vacation months and more investments from winter bonuses. However, more recent statistics suggest this seasonal pattern may not be the case, and the opportunity cost of periodically exiting and reentering the market based on certain months of the year may be significant.
Derek Prusa, CFA, CFP® and Ben Webster, CFP®
Co-Founders and Owners of Aspire Wealth
Improving Your Credit Score
