My Take on U.S Markets for May 2021
Market investors tried to de-risk to April 2020 levels in Week on May 10, why?
It has been a rough few weeks for active managers. We realize that and a multitude of factors have contributed to this. In no particular order:
– Technology leadership started to falter
– Inflation anxiety
– “buy the dip” stopped working
– Chorus of “top callers” is rising
– White House pushing for new taxes
This all seemed to have come to a head last week, as equities fell nearly 5% over 3 days (Monday to Wednesday last week). This was an attempt at a crash:
– VIX surged 80% over those 3 days to 28
– But it was a “failed” crash as the VIX never managed to exceed 30
– In other words, the market could not muster enough panic to push further downside.
Instead, I saw a strong rally in the second half of the week. I believe this rally will carry over into this week. In fact, we think that stocks are still on track to make new highs before June 30th, 2021.
– FYI, I still see S&P 500 reaching ~4,400 before mid-year, or 7%-8% upside from here.