null

Blogs

June Investment Bulletin

Bill Norris

June 07, 2021

Stay current on what’s happening in the economy to help you better understand how the financial news relates to your investments.

May key drivers

Despite an increase in volatility driven by concerns over inflation pressures building in the economy, global equities finished higher for the month of May, when looking at the MSCI ACWI Index. Across asset classes, we saw gains in equities, credit and real assets, which has been a consistent pattern over the past year. One area in equities that stood  out was the 2.6% gain in the Russell 3000 Value Index.      On a year-to-date basis, value stocks have performed very well, driven by investors shifting to cyclical, economically sensitive companies.

In early May, investors remained very focused on increasing price pressures that appear to be building. Core Consumer Price Index (CPI) reported in May for the twelve months ending April 2021 showed an increase of 3%—one of the highest readings in years. Although higher prices should be expected given the recovery in the economy and increasing demand, it does raise concerns about the how the Fed may or may not adjust monetary policy in the future.

The “reopening trade” got a big boost towards the end of the month as The Centers for Disease Control and Prevention relaxed their mask-wearing guidelines for fully vaccinated persons in the US. This led to states and municipalities moving quickly to adjust their guidance while lifting restrictions, prompting renewed optimism for investors that the economy was getting back on track and moving at a much quicker pace.

What to watch in June

On June 4, the May Jobs report will be released. This report will be reviewed closely considering that the April report came in far below expectations raising concerns about the real strength in the labor market. Growth in April came in at 266k vs. an estimate of over 1.0mm jobs, a big shortfall that surprised investors. Expectations from economists surveyed by The Wall Street Journal suggest non-farm payrolls will have grown by more than 675k jobs in May.

Signs of increasing inflationary pressures will remain in focus as we continue to see signs of supply shortages across wide swaths of the economy. Rental cars, computer chips, lumber and even pool chlorine are in short supply. The Fed is holding steady in their view that some inflation should be expected and will be transitory. The release of the May CPI on June  10 will be closely scrutinized by markets for further signs of pressures.

While the Fed meeting on June 15 and 16 will garner attention of investors for signs of shifting monetary policy, investors in June will also be watching how Europe is emerging from the pandemic. Recent data suggest that activity is picking up in Germany, the UK will be relaxing restrictions in June and overall sentiment has greatly improved. Getting Europe back on track will be a big boost to the global recovery.

Global asset class total returns through 5.31.2021

 

Bill Norris is chief investment officer and head of asset management for CIBC Bank USA. In this role, he oversees investment management, trust and estate services to individual and institutional clients of CIBC Bank USA. Bill also serves as a member of CIBC Private Wealth Management’s Asset Allocation Committee with more than 35 years of industry experience.