Markets “In a Nutshell” for May 17, 2021
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 1.14%, the S&P 500 fell 1.39%, the New York Stock Exchange Composite (2,000 stocks) fell 1.06% and the average investors index (Value Line Index) was down 1.15%. Foreign stocks (DJ Global ex U.S.) were fell 1.93%. Bond prices were lower for the week, with the 10-year U.S. Treasury ending the week 3 basis points higher at 1.63%. (Data source: Wall Street Journal)
Stocks Fall as Inflation Fears Rise
Stocks fell steeply across the market as inflation data reported in the middle of the week rose far more sharply than expected and brought into question whether rising inflation is here to stay or whether the rate at which prices rise will return to normal as the economic reopening matures. The obvious culprit of inflation is the massive amount of government spending since the beginning of the year, along with the supply constraints caused by the much faster and larger than expected demand for commodities across multiple different industries. From housing to food prices, inflation is taking hold and could cause a serious issue for the resurgent economy. The Federal Reserve, who’s mandate is to maintain steady inflation, has been steadfast in saying that the current rise in inflation is expected and “transitory”, meaning the expectation is that by the end of the year or sooner we should see a more normal inflation rate. If the Fed is correct, the economy will be ripe to begin its new growth cycle, but if they are wrong, there could be detrimental consequences for the economy. (Barron’s)
Negative cryptocurrency headlines throughout the week hammered the emerging investment asset class and dampened the massive momentum it has had since the beginning of the year. The week started with Tesla CEO Elon Musk, a former staunch advocate for the cryptocurrency market, pulled back his support for the asset class and said Tesla would no longer accept Bitcoin as payment, stating that the environmental impact of mining these coins is too detrimental. Cryptocurrencies broadly fell on that news, but fell even further after the Colonial Pipeline shutdown that wreaked havoc largely in the Southeast. The hackers that shut down the system demanded a $5 million payment in Bitcoin that would effectively hide any trace of the money paid, as well as the identities of the hackers. Between the environmental impact of mining cryptocurrencies and the money laundering appeal for criminal hacking, serious concerns still exist and will have a direct impact on regulation and the future of the asset class as a viable investment. (Barron’s)
What was the percentage growth in global renewable energy use for 2020? (Scroll Down for Answer)
Have a Great Week!
4. Global renewable energy use rose 45% in 2020, the largest annual increase since 1999. (Barron’s).