May 2021 Market Update

Fluent Financial Market Update as of Dec. 1, 2020
December 15, 2020
The Latest On Inflation and More
May 23, 2022

Performance from Feb 19, 2020 through May 14, 2021


Key Insights

  • We consider the recent inflation spike as temporary due to the “base affect” when comparing year-over-year numbers but see inflation on the rise in the medium term
  • With +90% of S&P 500 market cap having reported earnings, JP Morgan’s current estimate for 1Q21 operating earnings per share (EPS) represents year-over-year growth of 143%
  • We are looking to buy market pullbacks as this recovery continues to be powered by pent-up demand and sky-high excess savings going into the June 1st Summer travel season




Demand is outpacing Supply and pushing prices higher

  • The CPI inflation gauge expected at 0.2% and 3.6% MoM and YoY respectively came in at 0.8% and 4.2%
    • Highest jump in over a decade (largest increase since Sept 2008)
    • Used cars contributed 0.35% to core CPI. Add in hotels and car rentals and almost half of the core CPI increase is caused by 5% of the index (unsustainable)
    • The Fed says that this is mostly transitory and inflation will moderate back into the 3% range
    • Inflation surge could threaten a Biden $4 Trillion Infrastructure spending plan


Looking Closer at the Recent Inflationary CPI Jump

  • Close to 60% of the month-over-month increase came from five components
    • used cars, rental cars, lodging, airfares, and food away from home — that will have little staying power
  • As supply shortages run up against aftershocks from fiscal stimulus, and the base for comparison remains low, the CPI will continue to run hot into the summer


90% of the S&P 500 Companies have reported Q1 Earnings

  • Companies are reporting earnings that are almost 23% above estimates, more than 3x greater than typical upside surprise percentages
  • Q1 earnings are expected to have grown 46% over the same period in 2020
  • Analysts now expect high double-digit earnings growth for the remaining three quarters, and 32% growth rate for calendar year 2021

Investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with some investments. Past performance is no guarantee of future results.

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