Market Commentary — June 7, 2021
Markets traded moderately higher during last week’s shortened trading week. Energy shares performed the best within the S&P 500 as oil prices reached their highest level in 2 years. Consumer shares lagged, weighed down in part by the decline in Tesla.
The jobs report sent mixed signals about economic strength. The Labor Department reported that 559,000 jobs were added in May, which was below consensus estimates for 650,000. On a positive note, the unemployment rate fell more than expected from 6.1% to 5.8%. Those worried about inflation took note that average hourly wages rose 0.5%, representative of the tight labor market. Those that are working, are getting paid more!
Meme stock madness once again made headlines, with AMC the current posterchild, up more than 100% in a week and 2700% since its January low. For those not quite understanding this phenomenon, a meme stock is one that has gone “viral” drawing the attention of retail investors. The hype is not tied to company fundamentals, but rather interest is driven by social media posts and online forums on Reddit like WallStreetBets. Recent stock examples include AMC, Gamestop, and Blackberry.
And here’s something to think about, the NY Fed says it will begin selling its corporate bond ETFs starting June 7th, the first step in a nearly $14 billion corporate credit portfolio that helped bring order to the market when it became unhinged due to COVID worries. The Fed said its trading will be “gradual and orderly” but that is a lot of volume to fly under the radar and $8.6 billion of it is in corporate bond ETFs.
According to ETF.com, last week saw $1 billion in creates for US equity ETFs, a whopping $5.7 billion in international equity ETFs, and $2.8 billion in US fixed income. Not bad for a short week.
Why the surge in interest for international ETFs? Investors appear to bet that international shares will outperform US markets the remainder of the year. While international stock funds have trailed their U.S. counterparts for most of 2021, solid contributions from developed markets like Canada, France, Switzerland, and the UK helped reverse that trend in May.
We all have to tough it out for a full week next week – make it a good one!
CEO and Co-Founder