4th Consecutive Month Higher

May 28, 2021

May is one of only 2 months during the year where the stock market historically does not finish in positive territory. We wondered if the delay in filing income taxes until mid-May might delay some of the IRA contributions that typically come in April and help the month have a better tone. However, at the end of April the S&P 500 was already up more than 11% for the year, more than the normal annual gain, so some period of consolidation would also make sense. The month did have some volatility, but the S&P 500 hit a new all-time high early in the month and closed with a gain of .6%, while the tech heavy NASDAQ had its first down month since October. The S&P 500 is now 11.9% higher for the year.   Gold had a very strong month gaining 7.5% and oil was 4.7% higher. Everyone is watching interest rates and the 10-year Treasury yield ended the month fractionally lower as the Federal Reserve continues to buy bonds to keep interest rates low.

Rather than “sell in May and go away” investors began the month by continuing to put money to work. The S&P 500 rallied on the first day of trading and by the end of the week had gained 1.2%. On Friday we learned only 266,000 went back to work when the expectation was for 1M, but the market shrugged it off as a temporary statistical anomaly and rallied into week’s end. Over the weekend we leaned a cyberattack has disabled one of our nation’s largest pipelines disrupting gasoline shipments to the East Coast. The technology sell-off that had begun in late April gained strength and sent the tech heavy NASDAQ to the lowest level since late March. On Tuesday and Wednesday the S&P 500 lost 3% but rallied 2.6% on Thursday and Friday to end the week with a loss of 1.4%. Weakness in technology stocks continued to weigh on the overall market during the 3^rd week. In the middle of the week a 30% drop in Bitcoin shook the overall market, but the next day it bounced back and so did the market. A report on economic activity showing the strongest growth in history helped the market rally into week’s end, but the S&P 500 still ended with a loss of .4%. The first back-to-back down weeks for the widely followed index since October. The week before a 3-day weekend tends to have an upward bias and that is the way we ended the month. First time claims for jobless benefits for the previous week hit a post-pandemic low. Strong corporate earnings and generally encouraging economic numbers help the S&P 500 gain 1.2% for the week.

Over the last 100 years June has an average gain of .8% and has closed higher 56% of the time. More recently the period from June 1 to August 31 has been a fairly quiet period with a total gain of just 1%. We are likely to continue to see very strong corporate earnings reports and good economic numbers as we move into what is expected to be one of the strongest periods for economic growth in our country’s history. There is nearly $2 trillion of pent-up demand and that will start flowing into the economy as we reopen. With that said, the market has moved higher 4 consecutive months, is richly valued and vulnerable to a correction. The best outcome would be for the market to tread water while the economy catches up. The other option is a correction that would bring stock prices more in line with fundamentals. In an environment where all news is good news, it is hard to picture aggressive selling. We have shortened our fixed income maturities, added a hedge to our more defensive accounts and we will continue to be buyers on a tradeable decline.

If you know someone who would be interested in learning more about Greenberg Financial Group, or who is retired or thinking about retiring, or would simply like us to review their current portfolio, please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790. You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.