May 2021 in Review

Daniel Zeigler, CFP, CMFC, Portfolio Manager

Hi everyone, this is Dan Zeigler, Portfolio Manager at Midland Wealth Management. Today, I just wanted to provide a quick recap on the markets for the month of May.

The equity market started off strong in the first week of May, but then volatility increased as investors reacted negatively towards a higher than expected inflation number. However, over the last several weeks, the market has regained many of those losses and is currently trading near all-time highs. Investors seem a little less concerned about inflation heading into Memorial Day weekend, although the topic is still getting a lot of attention. 

Investors are worried that higher inflation may prompt the Federal Reserve to be forced to scale back their aggressive monetary stimulus policies quicker than expected, which would be negative for the stock market. The central bank continues to maintain their conviction that inflation pressures will be temporary. 

The bond market seems to be more patient with inflations as well, as the 10-year Treasury note is currently around 1.61% and is off the year’s high of about 1.78%. 

Home prices in March saw their highest growth in over 15 years with a growth rate of 13.2% year-over-year. This marks the 10th straight month of accelerating home prices and is the highest gain since December 2005. Prices are being pushed higher by incredibly strong competition in the market and near record low supply. In fact, the U.S. is currently short about 2.9 million housing units. Multiple offers and bidding wars on homes have become the norm, as properties only remain on the market for an average of 17 days or less, and over half of homes are being sold for more than their list price. 

The Russell 2000 small-cap index is on track for its longest monthly win streak since 1995. The index has been up for eight straight months and held on to a slight gain for May. A surge in U.S. Treasury yields could damper this uptrend, as rising borrowing cost could hurt small businesses. For the month, the Dow Jones is up 1.7%, the NASDAQ is slightly down 1.5%, and the S&P 500 ended up 0.66% and is still up for the year 12.7%. 

Thanks for joining me for this month’s recap.