US GDP was up at 6.4% annualized for the first quarter, and corporate earnings were very good. Jobs and manufacturing output were also advancing. Recent forecasts by most of the advisory services conclude that inflation will reach 2.7% by the end of 2021 from the current level of 1.4%.The infrastructure initiative will likely be a hard fight and will not significantly add to market gains. Add to that the lowest birth rate growth since 1918, and that will pose issues for future tax rates which could depress market gains. COVID death rates continue to decline, and there is veiled optimism about the future as solid gains of “shots in the arm” posit favorable consequences and sustained consumer confidence.
As we enter May, which is the historical beginning of the least positive six month period of the year, we see a slightly positive month ahead. It will not be all up, but rather variated with up days and down days. Volatility will continue, however, and there will likely be overall weakness all month until the last week. We are reminded of Mark Twain’s famous aphorism: “life does not consist of facts and happenings; rather it consists of streams of thoughts blowing through one’s mind.” Public perceptions will therefore likely govern the day relative to future market behavior. The historic probabilities for May are 53% for the Dow to be positive, 59% for the S&P to be up, and 62% NASDAQ to be positive; the probability for the smaller capitalization Russell 2000 is 64%. Prudence continues to point to the selection of safe issues and diversification, as we inch toward the summer months.
Sincerely,
Dwight W. Galda, ChFC, CLU, AEP
Principal
These are the opinions of Crescent Wealth Counsel and are based on information from sources believed to be reliable; however, opinions may change as information becomes outdated. Indexes mentioned are unmanaged and cannot be invested in directly. Past performance does not guarantee future results.