Weekly Snapshot May 19th, 2021
Market Review: Week Ending 5/14/2021
U.S. equities were volatile, with sharp swings higher and lower. Ultimately, rising inflation concerns pushed equities lower. For the week, The Dow Jones Industrial Average (DJIA) fell -1.14%. The S&P500 Index (S&P500) declined -1.39%. Leading the markets lower were the Russell 2000 Index (R2000) falling -2.07% and the NASDAQ Composite (NASDAQ) dropping -2.34%.1 Even with these declines, year-to-date market returns are still positive (DJIA +13.09%, S&P500 +11.73%, R2000 +13.01%, and NASDAQ +4.46%). During the week, the Russell 1000 Value Index (-0.72%) widen its lead to the Russell 1000 Growth Index (-2.10%). On a year-to-date basis, value has advanced +18.07% versus its growth counterpart +4.47%.2 Within S&P 500 sectors, outperformers for the week were Consumer Staples +0.38%, Financials +0.28%, and Basic Materials +0.06%, while sector underperformers were Consumer Discretionary -3.69%, Communications Services -1.95%, and Technology -2.23%.3
During 1st quarter earnings season, multiple managements mentioned rising costs and their potential to curve profits as the economy reopens. April’s Consumer Price Index (CPI) highlights this growing inflation scare. Year-over-year, the CPI jumped to 4.2%, the highest level since 20084, while Core CPI increased to 3.0%, a level not seen since 1995.5 Inflation expectations are building, the University of Michigan consumer sentiment report reported the highest level of inflation expectations since 2011.6 Some of this inflation has resulted from the temporary surge in demand as the economy reopens: Hotel prices +8%, Used car prices +10%, and Airfares + 10%.7 Whether this is “transitory” inflation as the Federal Reserve believes or something that persists depends on correcting the bottlenecks developed during the pandemic before it gets embedded in consumer expectations and reflected in wage growth (critical long run inflation indicators).
WHAT WE WILL BE WATCHING THIS WEEK
Various economic reports on the health and direction of the economy:
- Housing Reports – National Association of Home Builders, U.S. Census Bureau, and the National Association of Realtors.
- Weekly Unemployment Claims – U.S. Department of Labor.
- Federal Reserve Board Meeting Minutes (April 27-28).
- U.S. Conference Board’s Leading Economic Index.
STOCKS IN THE NEWS
- Walmart Inc. (WMT – held in Fundamentum GIE & Dividend Growth) rose 2.6% in premarket trading after the retail giant reported fiscal first-quarter earnings and sales that beat expectations. 1st quarter revenue of $138.31 billion was up from $134.62 billion last year and ahead of consensus numbers. Net income totaled $2.73 billion with adjusted earnings-per-share of $1.69, beating the consensus of $1.21. Strong growth was seen in Walmart ‘s U.S. comparable sales (+6%), and digital sales (+37%).8
- Home Depot Inc. (HD – held in Fundamentum GIE & Dividend Growth) surged 2.3% in premarket trading after the home improvement retail giant reported fiscal first-quarter profit and sales that were well above expectations, citing “unprecedented demand” for home improvement projects. Net income for the quarter was $3.86 a share compared to consensus earnings-per-share of $3.08. Sales grew 32.7% to $37.50 billion, beating the consensus of $34.82 billion.9
As always, we appreciate your confidence in our team.
Fundamentum Investment Committee
John Nichol, CFA® – Chief Investment Officer
Trevor Forbes – Investment Committee
Robert Armagno – Investment Committee
Christopher A. Silipigno, ChFC® – Investment Committee
Christopher G. King – Investment Committee
Timothy J. Shumsky – Investment Committee
1 FactSet – 5/14/2021
2 JPMorgan Asset Management – 5/14/2021
3 FactSet – 5/14/2021
4 John Hancock – 5/14/2021
5 FactSet – 5/14/2021
6 FactSet – 5/14/2021
7 Edward Jones – 5/14/2021
8 FactSet – 5/14/2021
9 FactSet – 5/14/2021
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