Market Commentary — May 17, 2021
The biggest worry for the market these days – inflation and the need for higher interest rates to curb it. Core inflation jumped 0.9% in April, the biggest monthly jump since 1982. CPI rose 4.2% over the past 12 months ended in April, exceeding forecasts for a 3.6% increase.
Stocks recovered some on Thursday, helped by a bigger-than-anticipated drop in weekly jobless claims to a pandemic low of 473,000. April retail sales were flat for the month, but March’s sales surge was revised higher to 10.7% and ecommerce is hanging in there as a big part of the spend.
So the question is, are all these mixed economic signals temporary dislocations spurred by the pandemic, or will higher inflation become the new normal?
If the pandemic were not enough, ransom hackers shut down a major gas pipeline, the Colonial Pipeline, causing fuel prices to sore in the Southeast. And Elon Musk killed Bitcoin, announcing that Tesla would no longer accept it as payment due to concerns about its environmental impact.
Despite all the ups and downs in the market, ETF investment remained steady, with $20.5 billion inflows last week, bringing the year-to-date total to $356 billion according to ETF.com. There is money flowing into value funds and there was a $2.4 billion creation in the Invesco QQQ Trust implying that there may be some bottom-fishing in large cap tech and growth names. Conversely, there were large outflows from small cap (IWM) and high yield corporate bond funds JNK and HYG.
Finally, the CDC revised its guidance announcing that if you are fully vaccinated you can mostly stop wearing your mask and there is no need for social distancing inside or out. So basically, we are all on our own to figure this out. How do we know who is vaccinated? We don’t. We do know that millions of children remain unvaccinated and the pandemic is not over. Further complicating matters is that many employers are reopening their offices with an obligation to maintain a safe workplace.
Let’s all just cross our fingers and hope for the best – or if you are vaccinated, maybe keep those masks on at least some of the time out of consideration for others who are not. Just a thought.
CEO and Co-Founder