So far this month volatility has been the story. The last two weeks have seen several significant percentage moves – both positive and negative. May 7th saw new record high closes for both the S&P 500 Index and the Dow Jones Industrial Average. Meanwhile, May 11th saw the worst day single for the Dow since February.
May returns as of the close of the market on Friday, May 14th, include the Dow Jones dropping 477 points (1.41%), the S&P 500 losing 8 points (0.19%), and the NASDAQ Composite declining 536 points (3.84%).
The dominant concerns are rising interest rates and inflation. On May 4th, Treasury Secretary Janet Yellen stated that “Interest rates might need to move higher to keep inflation in check.” Those comments drove the NASDAQ down 1.88% for the day. Anxiety over inflation and rising commodity prices has fueled fears that the Federal Reserve could raise interest rates sooner than anticipated – although the Fed maintains that they will hold to their current strategy.
We have seen rising prices and product shortages in certain areas. However, this is not surprising. Our recent newsletter addressed the “coiled spring” of our economy: as markets open up we expect to see a surge in purchasing. We anticipate this to be short-lived although we will continue to closely monitor the situation.
On the jobs front, news continues to be mixed: we hit a new low for initial jobless claims, during the pandemic, at 500,000 (pre-pandemic numbers were closer to 250,000). However, we also saw disappointing new job creation numbers at 266,000. Still signs of recovery persist: on 4/30/2020 the jobless rate was 14.8% with 23.1 million unemployed; the 4/30/2021 unemployment rate declined to 6.1% with 9.8 million unemployed.