Hope all is well. For the second week in a row, major U.S. stock indexes posted modest gains amid quiet trading. The S&P 500, the Dow, and the NASDAQ added more than 0.5%; each index has traded in a narrow range since May 24. The week’s results left the S&P 500 and the Dow just shy of record highs set four weeks earlier. Both were within 0.1% of their levels of May 7; the NASDAQ was 2.3% below its record, which was set on April 26. I have broken down this week’s news using songs and lyrics from the classic musical/movie Annie.
Jobs hold the key to gettin' more bucks. The closer we get to full employment the closer we are to getting America back on the path to prosperity. Monthly employment data released on Friday showed continued improvement in jobs growth and the unemployment rate. The economy generated 559,000 new jobs in May. There is a clear mismatch between the supply of workers and the demand for labor. With 8.1 million job openings and 9.3 million unemployed workers, demand has snapped back much more quickly than people have been able, or willing, to return to work. Multiple factors are contributing to this, including childcare, increased unemployment benefits and skills mismatches between pre-pandemic positions and existing needs.
Hard Knock Life
Might be time to throw the towel in for bond fund holders. Bonds have rallied the past two months presenting an opportunity to re-allocate out of bond funds. Fear of the Federal Reserve raising short term interest rates has subsided, lifting government bond prices, extending a recent decline in yields. The yield of the 10-year U.S. Treasury bond slipped to 1.55%, down from a recent high of 1.74% in late March.
Analysts are willing to bet their bottom dollar that tomorrow corporate earnings will grow. Strong first-quarter earnings have Wall Street analysts increasing their expectations for second-quarter results. During April and May, analysts raised their earnings forecasts for S&P 500 companies by 5.8%, the largest such increase in the history of that metric.
Let’s Go To The Movies
Shares of movie theater chain AMC and crypto prices remained in the headlines this week as these speculative assets continued to exhibit extreme volatility. The meteoric gains in these areas have caught investors’ interest. While short-term gains on higher quality investments may not be as eye-catching, long-term diversified stock allocations will provide solid growth and be well-positioned to navigate the next phase of the expansion.
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