Fun Facts about June
- Birthstone: Emerald
- Flower: Rose and the Honeysuckle
- Zodiac signs: Gemini and Cancer
- June is derived from Juno, the goddess of marriage.
- June is the month with the longest daylight hours of the year in the Northern Hemisphere, and conversely, June has the shortest daylight hours of the year in the Southern Hemisphere.
Stocks moved higher for a fourth month in a row. It wasn’t much but it still counts. The S&P 500 eked out a gain of just 0.65% in May and is now up 12.3% for the year. Signs of life getting back to normal are everywhere here in the U.S. Watching the NBA and NHL playoffs with packed stadiums is so much better than not hearing any fan noise. Walking into stores and restaurants without a mask is one less thing to remember before getting there and it’s great to see employees, servers, and bartenders without masks.
Supply is still trying to catch up with demand in most sectors of the economy. This has caused prices for raw materials to skyrocket. Fortunately, prices have come down just a bit from their peaks, particularly for lumber and copper but they are still historically high.
On the demand side, consumers are still willing to pay the higher prices. This is helping retail companies get back to pre-pandemic numbers. People want to spend right now, especially on travel and entertainment and it’s showing up in high occupancy rates for hotels and full flights at the airports.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices stayed relatively flat for both government and corporate bonds. The trend for prices is still down but bond investors may get a little relief as inflation worries ease up a little. I still expect to see bond prices lower at the end of the year versus today due to the economy starting to return to normal. Because of this, longer maturity bonds are not going to be the best investment right now. I would still try and keep your bond maturities short, no more than 2 years, to lower your portfolio risk.
The 10-year US Treasury note is now yielding 1.58% and the 30-year bond is at 2.26%, both slightly lower from last month. These rates have taken a pause in going up in the last two months but it’s a good bet that they’ll resume their upward trajectory shortly.
Interest rates barely moved in May. The charts for most savings rates and CDs look like a flat line on an EKG. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation.
Currently, the average savings account is paying 0.27%, exactly the same as last month. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value.
The 1-year CD interest rate is now averaging 0.51%, about the same as last month. The 5-year CD rate is the same as last month as well, currently at 0.69%. Fyi, these CD rates have remained nearly exactly the same since February.
Mortgage rates moved lower for the second month in a row, albeit not by much. Currently, the 30-year rate sits at 3.09%, just a tad lower than it was last month (3.11%). Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Demand remains very strong for both new and existing homes, despite prices breaking records in most locations. You might read that some areas of the country have seen home sales drop, but that is most likely due to no homes for sale (low or no inventory).
Oil prices jumped another 4.3% in May after a big rise in April. The price for a barrel of oil in the U.S. closed May at $66.32. The combination of upbeat economic data and good earnings from the oil companies helped spur the move up. Also, we are moving into the driving summer season, which historically has been positive for oil and gas prices.
Demand should continue to drive prices higher as the travel floodgates reopen. This will keep a floor under oil and gas prices even if we see increased supply by either OPEC or frackers in the U.S.
Gasoline prices jumped higher once again in May. There is a huge increase in demand as the summer travel season opens up coupled with the pandemic going away. The hack and subsequent shutdown of the Colonial gas pipeline helped that jump in prices as well. Prices at the pump are averaging about $3.05 per gallon, about 15 cents higher than a month ago. Louisiana has the cheapest gas right now, at $2.70. California has steadied above the $4 mark with an average price of $4.20 per gallon. FYI, a year ago, we were paying $1.98.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Infrastructure Bill: There seems to be little progress on reaching a compromise between the democrats and republicans regarding the huge infrastructure bill the white house is pushing. It would be ideal to put something together that both sides can agree on (I can dream). The market has already priced in some of the bill’s proposals (green energy, electric vehicles, etc.). These sectors could take a turn south if these sections of the bill get thrown on the cutting room floor.
- Coronavirus: We have made remarkable progress in taking control of this disease, even as we hit a grim milestone of over 600,000 deaths from Covid. Over 50% of the country has received at least one dose, up from 43% one month ago. Also, there are recent studies out that show immunity from the disease may last longer in our bodies than expected. This is great news, especially if we can get another 25% of our population vaccinated while the already-vaccinated are still immune. Overall, this is a good news story for stocks now, despite the average death toll of about 590 per day here in the U.S.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
