Despite a lackluster jobs report to start the month, markets continued to trend mostly higher as ongoing global economic reopening helped boost stocks.
Value companies outpaced growth companies in May as the industries that were hit particularly hard during the pandemic saw an increase in demand (continuing the reversal from last years’ trends). This resulted in a mixed bag of returns for major US indices as the value-oriented Dow Jones Industrial Average gained 1.93%, the more balanced S&P 500 gained 0.55%, and the tech-heavy Nasdaq fell 1.53%.
Overseas, developed international stocks outpaced emerging market stocks due to the slower vaccine rollout being experienced in many less-developed countries.
Bond indices experienced a second consecutive month of modest gains, clawing back some of the early-year losses, as yields remained range-bound following the sharp increase in Q1. The 10-year Treasury bond yield fell slightly from 1.65% to 1.58%.
With just one month remaining in the first half of 2021 (time flies when you’re having fun), investors will be keeping an eye on some key data points through the rest of the year: vaccination rates, inflation, job growth, and taxes.
Inflation is heating up as prices in the US experienced their largest year-over-year increase since 2008. The Consumer Price Index (CPI) surged 5.0% in May, compared to May 2020.
Driving prices higher were used vehicles (no pun intended), household furniture, and beef. Specifically, used vehicles accounted for about 1/3 of the total upward price pressure.
While inflation has been making headlines lately, it is important to keep in perspective. While the 5.0% number jumps off the page, remember that prices are being compared to a year earlier (May 2020, when the pandemic was ramping up and prices were hitting rock bottom).
Compared to two years ago (2019), CPI is just 2.5% higher – more in line with pre-Covid data.
Many experts believe inflation will cool off later in the year as the dog days of the pandemic fall off the back end of the calculation.
Ford has officially entered the game… the electric vehicle game, that is.
In May, Ford revealed the all-electric F-150 Lightening (cool name), which will be available starting in 2022. The starting price for base models is estimated at $42,000.
Why is this a big deal? First, it brings more competition into the electric vehicle space (think Tesla). Ford sells more F-150s in a year than Tesla’s total for all its models.
Furthermore, it could mark a major shift for “truck people.” The three best selling vehicles last year were all pickups, making up approximately 13% of all sales (you guessed it – Ford’s F-Series grabbed the top spot).
This announcement continues the trend for companies looking to adopt clean energy alternatives – a hot button in recent years.
Broad Market Returns
| Index | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | 0.67% | 10.84% | 12.74% | 40.40% |
| NASDAQ (QQQ) | -1.20% | 6.43% | 6.57% | 44.00% |
| Large Cap Growth (VUG) | -1.43% | 7.28% | 7.09% | 41.35% |
| Large Cap Value (VTV) | 2.92% | 13.56% | 18.29% | 41.80% |
| Small Cap Growth (VBK) | -2.68% | -1.57% | 3.58% | 43.48% |
| Small Cap Value (VBR) | 2.24% | 11.99% | 24.33% | 70.79% |
| Developed International (VEA) | 3.58% | 9.70% | 11.55% | 42.51% |
| Emerging Markets (VWO) | 1.70% | 2.78% | 7.66% | 47.32% |
| REITs (VNQ) | 0.81% | 14.33% | 18.29% | 34.17% |
| Aggregate Bonds (BND) | 0.15% | -0.26% | -2.65% | -0.82% |
| Corporate Bonds (VCIT) | 0.57% | 0.13% | -2.33% | 3.31% |
| High Yield Bonds (JNK) | 0.07% | 1.78% | 1.43% | 12.18% |
| Long Term Treasuries (VGLT) | -0.11% | -2.84% | -11.49% | -13.84% |
| International Bonds (BNDX) | 0.00% | -0.20% | -2.48% | 0.15% |
Fun Facts – June Edition
- June is the month with the longest daylight hours of the year in the Northern Hemisphere.
- The word June is derived from Juno – the ancient Roman goddess of marriage (looking forward to those summer weddings).
- The June solstice will occur on June 20, officially kicking off summer for 2021!
- Piggybacking off last month’s “sell in May and go away,” here is another popular Wall Street adage: June Swoon. The June Swoon references the belief that stocks enter a lull period during the summer months, before activity picks back up after Labor Day. While trading volume is historically lower during the summer, it is important to remember that doesn’t means stocks will always decline, and seasonal patterns are not always the case. The opportunity cost of periodically exiting and reentering the market based on certain months of the year may be significant, which is why it’s important to stick with a long-term strategy rather than trading based on market catchphrases.
Derek Prusa, CFA, CFP® and Ben Webster, CFP®
Co-Founders and Owners of Aspire Wealth
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