Market Review - May 2021
Source: Zephyr Style Advisor
US stocks cooled off to end the month up 0.7% after climbing to new highs in early May amid fears of rising inflation, maintaining strong gains of 12.6% for the year. Developed international equities outperformed US stocks, up 3.7% for the month as vaccination rates picked up in Europe. However, international equities both in developed and emerging markets trail US stocks for the year.
Across market style in the US, the more well-established stocks within the value segment outperformed the fast-growing stocks within the technology sector by over 3.7% in May and over 12% for the year. This “flight to quality” away from growth-oriented stocks can be attributed to stronger expectations for economic growth coupled with inflation uncertainty. Within US sectors, traditional value sectors like energy, materials, and financials were the strongest performers, widening the gap over growth-oriented technology stocks for the year.
US Bonds rose 0.3% for the month, a steady climb that began in April 2021 as rates fell but still remains down -2.3% for the year. The yield on the 10-year Treasury note ended the month at 1.58%, continuing the downward trend from 1.63% at the start of the month (and 1.74% March close). Within bonds, Treasury inflation protected securities (TIPS) gained 1.2% and was one of the top performers for the month.
Gold continued its rally and rose 7.7%. Commodities rose 2.7%, and the US dollar fell -1.5%. This rise in gold, commodities, and weakening of the US dollar can be attributed to expectations of rising inflation from investors. US REITs once again posted modest gains, up 0.8% for May 2021 and 18.1% YTD, as the re-opening trade continues to play out. Finally, relative to a globally balanced (60/40) equity/bond index, allocations to gold, commodities, and global equities helped while US REITs and global bonds hurt for the month.
Source: Zephyr Style Advisor
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