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Week of May 24, 2021 Thumbnail

Week of May 24, 2021


We hope this economic and market update finds you well.  A few takeaways from last week's market moves:

  • Inflation: Inflation fears continue to rattle the markets, with the tech heavy NASDAQ index nearing correction territory, declining 8.5% from it's April high. 
  • Is the math really that simple?  The Federal Reserve remains committed to holding interest rates near zero for the foreseeable future.  How long?  With their goal of getting 8 million unemployed people back to work, it would take roughly 16 months of payrolls increasing by 500,000 to get there.  Last months print of only 265,000 was a big disappointment versus the 900,000+ number from March, so somewhere in the middle gets you to late 2022 before they raise rates.  
  • A new reference point?  It is hard to believe but equity markets are up over 20% from the pre-pandemic highs in February 2020.  At that time investor fears centered on a market that looked expensive, with many advisors and forecasters talking of  gladly accepting a low single digit return over the next twelve months.  Today, for those with a balanced portfolio of 60% stocks and 40% bonds, it would take a market downdraft of over 25% just to bring them back to those pre-pandemic highs--yes that's right, the highs and not the low hit on March 23, 2020.   And with a normal correction of 10-15%, investors would still realize those low single digit returns that were forecasted before the markets went off the cliff--not so bad when put in perspective of where we were in 2020.
  • S&P 500 Index Concentration:  The top five market capitalization stocks in the S&P 500 Index combined equal the combined market capitalization of the bottom 323 stocks in the index!  Diversification becomes even more important.

You can view our full update of last week's markets in the linked update below.  As always, please feel free to contact us on any questions or to set up a meeting or call to review your portfolios and financial plan.

 John J Klobusicky, CFA, CAIA, Managing Partner, FMA  Advisory Inc.



Weekly Economic Update

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