Market Commentary — May 24, 2021

Markets traded moderately higher during last week’s shortened Stocks posted mixed returns last week, as the S&P 500 ended up modestly lower, while tech names regained some ground. Inflation remains the primary concern as it may force the Fed to rein in its accommodative stance.

Minutes from last month’s Federal Open Market Committee (FOMC) meeting offered some clues into the Fed’s thinking, with a number of participants suggesting they “begin discussing a plan” to “taper” the Fed’s monthly asset purchase program. But Fed members still view the supply chain bottlenecks pushing up inflation as “transitory” in nature and expect longer-term inflation to remain within their 2% target.

On Friday, preliminary PMI readings came in at a record 68.1 in May, a significant jump from April’s 63.5 reading and well above the consensus forecast. PMI readings above 50 suggest economic expansion. The service sector was particularly strong, rising to a record 70.1 in May up from April’s 64.7 reading. But with all this good news, inflationary pressures were also evident with input prices and output charges seeing their sharpest increases since October 2009, when the data first started being collected.

Cryptocurrency continued its second week of selloffs, as Chinese regulators announced a new crackdown on bitcoin mining and trading. There were also more Elon Musk tweets. Bitcoin is trading more than 40% below its record level of $64,000. Similarly, Ethereum is off 35% from its all-time high and Dogecoin has given back 45%. Still, notable experts such as private equity billionaire David Rubenstein and former US Treasury Secretary Larry Summers say “crypto is here to stay”.

Hester Peirce, aka “Crypto Mom” of the SEC, says the Wall Street regulator is running out of excuses for not signing off on a Bitcoin ETF.

“It’s well past time that we approve an exchange-traded product in Bitcoin,” Peirce said on Friday. But recent price volatility and the latest SEC statement on May 11 calling Bitcoin “highly speculative” suggests an approval timeline may not be imminent.

Two Canadian bitcoin ETFs issued “market disruption” warnings during the week’s crypto turmoil, highlighting the risks faced by retail products.

Is Polkadot the next star altcoin? It has risen more than 1200% since it began trading in September of 2020. Valkyrie and Osprey Funds just launched the Polkadot Trusts.

In the absence of ETFs, investment companies are still finding ways to launch products using different vehicle structures.

Jane Edmondson
CEO and Co-Founder

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