Improved COVID-19 Case Counts, Businesses Reopening and Discontinued Mask Mandates
The S&P 500 gained 0.7% in May, marking its fourth consecutive positive month. Markets were boosted by continued improvement in new daily U.S. COVID-19 cases, which fell below 10,000 for the first time since the early stages of the pandemic (CDC.gov). Due to the improved COVID-19 case counts, businesses and workplaces in many states have fully reopened. By the end of June, even the states that have been slowest to ease restrictions will be fully open (NY Times, Reopening Plans and Mask Mandates for All 50 States).
What Worked & What Didn't
Not surprisingly, May’s best performing sectors were those that benefitted from the continued economic reopening. Financials, Materials, and Energy all gained nearly 5% or more on the month. Conversely, 2020’s outperformers continued to have a hard time replicating their success in 2021, as Technology and Communication Services were down during the month. Consumer Discretionary stocks fell 3.8% during May, and with 9.3% GDP growth expected for the quarter (Atlanta Federal Reserve), demand for consumer goods is not the problem. The challenge is supply, with inflationary pressures on commodities, supply chain constraints, and limited worker availability stifling robust demand. Anyone who has recently ordered furniture or undertaken a home construction project is well aware of what is hopefully a short-term issue.
What We're Watching
As we move into summer, our outlook remains largely unchanged. Massive fiscal stimulus and the global economic reopening should offer an abundance of support for stock markets, and the expected 9.3% quarterly U.S. GDP growth is unprecedented. Similarly, many potential headwinds also remain in place. Rising inflation, U.S. debt levels, politics, and volatility surrounding speculative stocks all present risks to markets. We continue to expect fiscal stimulus, economic reopening, and historic growth to offset near-term headwinds.
We hope you enjoy the start to your summer and are able to resume most of your pre-pandemic activities.
Past Performance is no guarantee of future results. All investments carry some level of risk. The S&P 500 Index is an unmanaged, market capitalization weighted index of 500 common stocks widely regarded to be representative of the US market in general. Russell 2000® Index (U.S. Small Caps): Measures the performance of the 2,000 smallest companies in the Russell 3000®Index, which represent approximately 10% of the total market capitalization of the Russell 3000® Index. Russell Midcap® Index: Measures the performance of the 800 smallest companies of the Russell 1000® Index, which represents approximately 36% of the total capitalization of the Russell 1000® Index which is a mid‐cap index. MSCI EAFE Index: Measures the equity market performance of developed markets outside of the U.S. & Canada. MSCI EM Index: Captures large and mid cap representation across 24 Emerging Markets countries and covers approximately 85% of the free float-adjusted market capitalization in each country. Barclays Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Indices are unmanaged and direct investment is not possible. The opinions expressed are those of the author and not necessarily those of Robert W. Baird & Co. Incorporated.