Another Volatile Week as Markets Look Exhausted

May 21, 2021

Digital currencies, special purpose acquisition companies (SPACs), and many high-flying growth stocks took it on the chin early in the week as investors continued fretting over inflation and as China announced a cryptocurrency crackdown. Despite the volatile start to the week, the broader markets attempted to steady themselves by week’s end once the Fed minutes were released and as dip buyers saw opportunities to profit from re-opening optimism. According to the Centers for Disease Control, approximately 60% of Americans have now received at least one dose of the Covid-19 vaccine. This comes just in time for next week’s Memorial Day weekend – the unofficial start to summer vacation. U.S. economic news was particularly light this week, with housing starts and existing home sales struggling to maintain their robust pace amid rising materials costs and supply chain issues. In overseas news, the Eurozone signaled that it has commenced its post-Covid pandemic recovery with eurozone growth accelerating at its fastest pace in over three years in May. Inspired by what is expected to be a strong summer of economic growth, investors managed to contain the S&P 500’s weekly loss to -0.43%.   

Existing Home Sales Fall for Third Straight Month

Sales of existing homes fell -2.7% in April to a seasonally adjusted annualized rate of 5.85 million units, marking its third straight month of declines. The drop was driven predominantly by a lack of supply, which has fallen by -20% relative to a year ago. The current inventory of available homes represents a mere 2.4-month supply. For context, a six to seven months supply is considered a healthy balance between supply and demand. The tight supplies have led to bidding wars with the National Association of Realtors estimating that 5.1 offers are made for every listing. The tight competition has also led to homes flying off the market, with the average home selling in just 17 days. The supply/demand imbalance has served to push prices higher with the median price of a home increasing 19.1% from a year ago to $341,600. That was the highest median price on record and the largest annual increase on record. With the typically busy summer homebuying season upon us and a strong seller’s market, more inventory could soon hit the market and help existing home sales regain their footing in the months ahead. . 

Housing Starts Fall Short on Materials and Labor Shortage

Housing starts came up short in April as home builders broke ground on just 1.57 million homes, down -9.50% month-to-month. That missed economist estimates of 1.70 million. Rising materials costs, particularly for lumber, as well as supply chain issues have limited the supply of homes that builders can quickly add to the market. Despite rising prices, demand continues to rise as permits for new construction rose 0.30% in April to 1.76 million. Demand for homes should remain healthy as the supply of existing homes remains tight, the economy and jobs markets continue to strengthen, and mortgage rates remain near historic lows.    

Eurozone Business Growth Hits Three-Year High

The Eurozone notched its fastest pace of growth in over three years as much of the Eurozone eased social distancing restrictions from the spring in order to combat the surge in Covid cases. With consumers now out and about more and businesses returning to more normal operations as social distancing restrictions have been loosened, the IHS Markit’s flash Composite Purchasing Managers’ Index climbed to 56.9 in May from 53.8 in April. Numbers above 50 indicate expansion, while numbers below 50 indicate contraction. Service firms saw a big swing in momentum with the new business index soaring to 56.7 from 49.7. That was its highest reading since January 2018. Demand for goods also remained exceptionally strong with the manufacturing index hitting 62.8. With this most recent survey, Europe finally looks poised to join the recovery along with the rest of the world’s developed economies. 
Despite what is sure to be a very active summer economically, the old adage “sell in May and go away” might prove truer today than at any point in recent memory. The saying draws its wisdom from the fact that the average returns during summer months (May through October) tend to be lower than during winter months (November through April) when viewed historically from 1950 to present. This pattern, however, has become less reliable and less pronounced over time – particularly over the last decade. Any seasonality that may have once existed due to summer vacations and a less engaged workforce has probably been more than offset by the internet, email and smartphones. The adage’s relevance today, in 2021, is due more to the fact that the market just looks tired, being weighed down by stretched valuations and high expectations. Markets have been susceptible to inflation recently and while a good economy is one thing, a hot economy might have investors wishing they had taken a brief vacation.
The Week Ahead

With more than half of Americans receiving at least one dose of the Covid-19 vaccine, Memorial Day weekend looks to be the start of a busy summer travel season. Probity Advisors, Inc.’s Week in Review will not be published on Friday, May 29th in observance of the holiday weekend. We will return on Friday, June 4th with the hotly anticipated jobs report and the latest manufacturing and non-manufacturing numbers.\.

Traditions of Pomp and Circumstance

This is the time of year when graduates march across the stage to collect their diplomas. A few different graduation traditions have arisen due to the pandemic, such as online ceremonies, drive-by graduations, and even drive-in graduation events. One tradition that has persisted during the season of processionals is the playing of “Pomp and Circumstance.” The term “pomp and circumstance” means impressive formal activities or ceremonies, according to Webster’s dictionary. It comes from a line in Shakespeare’s Othello recalling triumph in war. In 1901, Edward Elgar, one of the leading European composers at the time, composed a military march titled, Pomp and Circumstance March No. 1 in D. Elgar included the music in the 1902 Coronation Ode for Britain’s Edward VII with lyrics by poet Arthur Benson, producing the patriotic song “Land of Hope and Glory.”
Four years later, the song was played when Elgar was given an honorary doctorate from Yale University. Two years later, Princeton used the tune at a graduation, followed by the University of Chicago in 1908, Columbia in 1913, Vassar in 1916, and Rutgers in 1918. By the 1920s, it had become the well-known graduation music with its trumpets and flutes that we all recognize today. It is the middle section that is often repeated over and over and has become a graduation theme song, but the entire piece is six minutes.
Another graduation tradition that has continued over time is the square graduation cap, commonly known as a mortarboard. Its origins date back to the 1600s when the first colleges in America were established and modeled after English institutions like Oxford and Cambridge University, including what people wore. Caps in varying styles and sizes denoted academic degrees and prestige. Today, college graduates with advanced degrees wear rounded caps, but undergraduates don the square cap. It is called a mortarboard since the square resembles the tray bricklayers use when applying mortar.
In 1912 the graduating class at the U.S. Naval Academy tossed their midshipmen hats in the air after they received their new officer caps during the ceremony. It’s believed that those officers started the tradition of tossing graduation caps. 
Finally, graduation season brings with it the tradition of the commencement speech. In the U.S., early commencement speeches were given by students as a way to demonstrate what they’ve learned. Those graduating would give lengthy orations in multiple languages. The trend of celebrity commencement speeches began more recently. This year, musicians, famous alum, political leaders, and other prominent figures will deliver sage advice to graduating classes across the country. Below are some of the speakers tapped for this year’s ceremonies.
Musician John Legend delivered Duke University’s commencement address last week. Legend, who graduated from the University of Pennsylvania in 1999, received an honorary degree from Duke. 
Graduates of the United States Coast Guard Academy heard from President Biden at their commencement last week.
Robert Iger, executive chairman and former CEO of Disney is slated to speak at the University of Texas.
The nation’s most famous physician, scientist, and immunologist, Dr. Anthony Fauci, will deliver speeches at Vanderbilt, University of North Carolina, Emory, and Yale’s School of Public Health.
Joy Harjo, the 23rd United States Poet Laureate, will deliver the address at Smith College.
Tulane University invited famed civil rights figure Ruby Bridges, who was the youngest child among a group of Black students to first integrate schools in New Orleans, to deliver their graduation keynote speech.
Harvard and Princeton announced that alumna Ruth Simmons, Ph. D., will give this year’s address. Simmons is president of Prairie View A&M University, president emerita of both Brown University and Smith College, and one of the nation’s foremost leaders in higher education.
Journalist, author, and science policy expert Bina Venkataraman was tapped to deliver the commencement speech at the University of Southern California.
Southern Methodist University welcomed alumna and entrepreneur Whitney Wolfe Herd to deliver the keynote graduation address this year at an outdoor ceremony at Ford Stadium. Herd was the youngest woman to take a company public and is the world’s youngest female self-made billionaire.
Probity Advisors, Inc. congratulates all graduates and their families and extends our best wishes for the future. Our caps, or mortarboards, are off to you for your achievement! Cue the music. 




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