Mary Ann Drucker, Assistant Portfolio Manager, discusses how the equity and bond markets performed during the month of April.
May Stock Market Update Transcript
Hello, I’m Mary Ann Drucker here with our video market update for May 2021.
After the year started off with a solid first quarter, the equity markets continued to sway to the same tune in the month of April. Whether from the 1979 song by The Whispers or the 1967 hit by Sonny and Cher, the line the beat goes on can best describe how the broad indices performed in April. In the U.S. markets, the S&P 500 and NASDAQ led the way, both up over 5% including dividends. Foreign and small-cap stocks, and even commodities, also participated to the up side, though to a lesser degree. Growth stocks, such as technology names, recovered nicely in April after really struggling in February and March. And value stocks continued their upward climb. The April tide seemed to lift all boats.
The overall bond market, however, has been weak so far this year, although bonds did have a positive showing in April. But not all areas of the bond market have been performing poorly. High-yield corporate bond funds, which we hold in some of the strategies, have actually held up relatively well since they tend to move more in line with the overall stock market.
When equity markets are in an uptrend and the portfolios have exposure to areas that are leading, there’s not much that we need to do in terms of tweaking the portfolios. In April, from a high-level perspective, we reduced exposure to small-cap stock funds in favor of large caps, and we continued to add exposure to large-cap value stock funds.
Two terms you might hear in the financial media are growth stocks and value stocks. In our equity-oriented portfolios, we have exposure to both of these areas as there continues to be a tug of war between these two camps with growth leading one day and value leading the next.
Growth stocks generally refer to companies that are growing at a faster rate than the overall stock market. Investors are willing to pay a premium for this higher growth, so they tend to have higher valuations. Technology, consumer discretionary, and biotechnology are areas that are generally referred to as growth stocks. Value stocks, on the other hand, are companies that are considered to be trading at a discount. They tend to have lower growth rates and higher dividend payouts. Energy, financials, and basic materials fall into this category.
Finally, while most of us look forward to spring, some welcome the season with trepidation as the spring and summer months are generally the weakest of the year in terms of stock market performance. This table, however, shows that’s not always the case, especially recently. Over the past 10 years, most May-to-October periods have actually shown positive equity returns. Last year, the recovery from the COVID correction was particularly impressive, but it remains to be seen whether investors will continue to whistle to the tune the beat goes on as we head into the summer months.
Well, that’s it for this video market update. If you have any questions or comments about this content, please don’t hesitate to call or email us. Until next time, thank you for watching.