Many market prognosticators were "guessing" stocks would begin to pullback or even sink in May. They were wrong and thankfully so. Our outlook remains positive for stocks in general but it will not be straight up from here. 

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     May seems to have turned out to have some degree of worry to it but nothing too threatening and at the end of the month was up only about a half a percent ( yawn). It did seem in the first half of the month there might be some price breakdown but certainly nothing  which worried us too much since so much of the backdrop seems to have some strength to it. 

     Though the first five months of this year are extremely different from last year, the first half of May this year reminded us of the first half of May, 2020.  My thoughts shared exactly a year ago were this, “The first half of May was like watching paint dry for the S&P 500. Full-on boring.” The same was true here in 2021, yet the second half of May of this year did not look anything like a year ago. May of last year was up 4 and a half percent and this year the S&P 500 was up almost one-tenth of that, a mere .5%.


     As you can see in the graph below, there just never was anything to get too excited about. There were many that were predicting that May was the month everything would begin to break down and markets would capitulate and move South. That certainly did not happen.

The S&P 500 Index and the DJIA for the full month of May.

     While it is true that now we're basically through almost all of the S&P 500 companies' earnings reporting for the 1st quarter, earnings were significantly higher (see comments below) and yet that was completely expected. 


     The only broad market U.S. stock index which was up greater than 1% was the Dow Jones Industrial Average and it was up only marginally above 1%.


     Though there were no extreme outperformers in the month of May, there were a few segments (sectors) of the stock market which were noticeably stronger than others. For instance, energy stocks and financial stocks both outperformed the S&P by about a 6:1 margin. This is not wildly unexpected since both sectors have outperformed the S&P index all year long (see the graph below). For the month, while commodities and emerging market stocks ended somewhere in between these leading sectors, both were outperforming the S&P 500 in May but not by significant margins.







Here are a few notes on inflation.

  • Product & services demands continue to rise, inventory/supply + labor constraints continue to mount and the combination of which continues to flow through prices pushing them higher still.
  • More labor is the primary conduit for increasing supply and yet it is the prevailing imbalance(s) to help meet demands.
  • Hiring in April was soft against a step up need for improvement in more services activity. This serves to push concerns around even greater demand vs supply imbalances and prospective price spiraling upwards even more. 
  • With jobs being hard to fill and now sitting at an all time high, employment  for services and manufacturing still sliding, coupled with the hiring-to-job openings ratio at a record low, the share of job postings indicating “urgent” has doubled in the last few months and all manner of evidence continues pointing in the direction of more tight(ening) in the  labor supply. 

     The U.S. came out with its GDP estimates for May and it showed the economy grew by 6.4% in Q1 2020, this was below the average of expectations. Consumer spending and business investment grew by a large 11.3% and 10.8% respectively, and each were revised higher from the previous estimates earlier in the year. Inventories of products fell and is typically viewed as positive for future GDP reports as inventories will need to be rebuilt (if we can get the labor markets moving well).


     1Q earnings data improved nicely and now with 95% of the S&P 500 companies reporting, corporate profits grew 51.9% this year over last year and that bested the April jump of 45.8%. These exceeded expectations for 1Q profits growth, which as of March 31 was tagged at 23.8%. 2Q is expected to be even a larger jump with profit growth at or near 60% and revenue will likely grow at 19%. 

     May was a conundrum for those seeking economic impact clarity on the COVID recovery. May gave us significantly higher inflation than expected which, includes the highest core inflation print in 40 years and a jobs report which underwhelmed projections badly and which now shifts the narrative on unemployment policy(s). Oddly, in spite of these significant changes in data points, the bond markets yawned and took no notice for Treasury rates, credit spreads and stocks were nearly unchanged (show above in the first graph), with consumer sentiment improving just a bit even with these negative developments. 


     Fed members made efforts to attempt to address the burgeoning inflation concerns. The inflation and jobs reports created the potential for a disruption to consumer thinking, but other factors such as strong GDP numbers and corporate profits might help to keep the robust recovery carrying up despite the recurring inflation fears. 

We remain watchful!

Ken Graves, Chief Investment Officer

Capital Research Advisors, LLC 

Capital Research Advisors, LLC, 
4185 B Silver Peak Parkway, 
Suwanee, GA 30024 
800 -767- 5364 
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Mortgages (click here)  


There is still time!  The average interest rate for a single family home currently financed in the U.S. for more than 3 years is 4.1%!  Refinance that house and shove money into your pockets.

Mortgage rates.. we have been pointing them out for a long time.  Talking about them heading lower and lower and now, the great opportunities may be gone.  
There is an old saying about housing though,

"If housing subsidies, the economy dies."

Estate Planning (Please)

(The Above is NOT effective estate planning).


     So this past month we began an interesting conclusion to a very long process. Going back in time some twelve years ago we had a client who passed away. The interesting thing is for this client they did not have any kind of an estate plan. No will, no trust, no documentation of many things related to their assets but thankfully, we did have one important piece of information.

     We do require anyone with an IRA with us to state a beneficiary in the original application before we will even open the account. Thankfully that was in place or this process for the family could have been even longer.. 

     The odd portion of the situation with this client is they had an IRA with us but also had an account which was not an IRA, and it stated plainly that their instructions for their beneficiary were to, “See my estate plan”. 

      Again, they did not have any kind of estate plan so there was nothing to look at when the family went to “see”. Twelve long years it has taken this family to get everything taken care of.   


Please do estate planning. Please keep it updated, maybe review it every 3 years or so.

     Another situation developed back in 2015. A client in their 60s who did not have any type of an estate plan and had some serious medical issues. Then they suddenly passed away.  They had actually been in our offices on Wednesday afternoon and they did not wake up Friday morning.

     We had been urging them to come up with an effective estate plan for quite some time. They knew they needed to but they simply had not carried out any actions related to getting this done. 

     As it turned out, the only living relative that they had was their stepfather and at the time the stepfather was 94 years old. Since the plan was not written down and not official in any way, the stepfather could not automatically take over things.  It had to work through the court system and that happened very slowly. At one point the stepfather became incapacitated himself, and then the court had to reverse everything going on and had to appoint  another party to take over the situation. As you might guess, another situation developed late in the cycle of all this, a pandemic hit.

     So this multi-year process could have been solved with a couple of hours with an attorney laying out an estate plan. 


Please do estate planning. Please keep it updated, maybe review it every 3 years or so.

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This report/summary is to be considered general in nature, reflects our opinions and is based on our best judgment at the time of writing. All information is deemed to be from reliable sources but we cannot guarantee its accuracy. No warranties are given or implied as to their promise of occurrence in the future or their accuracy. It is the readers’ responsibility to decide if any of our opinions are suitable for their own individual situation, and in what manner to use the information. No specific decisions should be made based on this report. These opinions should not be construed as a solicitation for any service. Past performance does not guarantee future results. The opinions expressed in this piece are those of the author and do not necessarily reflect the opinions of Ceros Financial Services, Inc.

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All the information in our newsletter is believed to be reliable and much of it is based on the proprietary research of Capital Research Advisors, LLC itself. However, because of the volume of information we review and the frequency with which it changes the information can only be provided as is on a best efforts basis. The information is not intended to be actionable investment research and therefore should not be used as such. Sources for this information include, but are not limited to, CBS MarketWatch, Big Charts, Bloomberg, Streetscape, Money/CNN, Futuresource, Stock Chart, Yahoo Finance, AmiBroker and

Capital Research Advisors, LLC,
4185 B Silver Peak Parkway,
Suwanee, GA 30024
800 -767- 5364
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