Weekly Market Update 5/21/2021

This week has brought some excitement to the city of Las Vegas, with our own Golden Knights once again reaching the first round of the Stanley Cup playoffs.  I was able to catch Game 2 of the series at T-Moblie Arena, thanks to my father-in-law, and revel in the energy of the crowd as they achieved one win closer to moving on to the next round.  On another personal note, Laura and I were able to catch an Aviators game this week.  As you all know, baseball is my happy place, and it has been refreshing to have these experiences again as we move closer toward normalcy both as a city and as a country. What are some of the things you are doing as the world begins to turn again?

Now, on to this week's summary:

U.S. stocks finished mixed as choppiness in the markets returned to stymie the Dow and S&P 500 attempts to overcome early week losses, though the Nasdaq managed to snap a string of four-straight weekly losses.

Conviction appeared conflicted amid a host of strong global data, while Fed uncertainty remained palpable as signs of rising inflation figures continued to pour in. Optimism of strong global economic recoveries was bolstered by May business activity reports today that showed U.S. and U.K. growth registering records and Eurozone output the strongest in over three years, but Markit noted that cost burdens continued to be keenly felt.

Earnings reports also painted a positive picture, headlined by strong results and guidance from Deere & Company and Applied Materials. Treasuries were little changed, while the U.S. dollar recovered somewhat as volatility for the greenback continued. Gold and crude oil prices gained ground. In other economic news, April existing home sales unexpectedly dropped. Asia finished the week out in mixed fashion and Europe traded mostly higher following the data. 

This week featured a lot of churn and rotation between growth and value stocks, which made for a lackluster performance at the index level. The Nasdaq Composite (+0.3%) rose modestly, while the S&P 500 (-0.4%), Dow Jones Industrial Average (-0.5%), and Russell 2000 (-0.4%) ended with modest losses. 

The market appeared to adhere to the "peak growth" narrative this week after April housing starts, April existing home sales, and the Philadelphia Fed Index for May all decelerated on a month-over-basis basis. To be fair, preliminary data out of the IHS did show manufacturing and service-sector activity accelerate in May. 

What's more, the heavy selling in the cryptocurrency market this week likely served as a reminder that it might be a good idea to take some profits for stocks that are up big this year. 

Accordingly, the cyclical S&P 500 energy (-2.8%), industrials (-1.7%), financials (-0.9%), materials (-1.4%), and consumer discretionary (-1.2%) sectors declined the most this week. Aside from the consumer discretionary sector, each of these sectors are up double-digit percentages this year. 

Conversely, investors leaned defensively on the health care (+0.7%), real estate (+0.9%), utilities (+0.3%), consumer staples (+0.1%), and information technology (+0.1%) sectors. Granted, the outperformance of the tech sector was more likely a function of investors nibbling into beaten-down growth stocks. 

The growth stocks helped the S&P 500 climb back above its 50-day moving average (4091) after it briefly dipped below the key technical level for the first time since March on Wednesday.  

Separately, the FOMC Minutes from the April meeting revealed that some participants thought it might be appropriate to start talking about tapering asset purchases in future meetings if the economy continues to make rapid progress towards the Fed's goals on employment and inflation.

The market didn't react too noticeably to this passage, arguably due to a view that it might have been more surprising to see no mention of the need to start talking about tapering asset purchases.

The 10-yr yield decreased one basis point to 1.63%, representing a view that the Treasury market isn't that concerned about inflation and is siding with the Fed's view that inflation will be transitory. 

As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat. 

Justin J. Long CFP®
Founder/Lead Advisor
Diazo Wealth Group
702-745-1800 Direct
702-278-6560 Cell

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Source: 1. FactSet

Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.

Innovative Adviser Solutions, LLC, a registered investment adviser, dba Diazo Wealth