The S&P 500 closed the month slightly below (less than 1.0%) its all-time high set on May 7. The TSX set a new all-time high on May 28 but declined 0.6% in the last day of trading for the month. The S&P 500 has risen 11.9% and the TSX 13.2% and all the GICS sectors in both indices are positive year-to-date.
House prices in both the US and Canada continued to climb. In Canada, Teranet reported that house prices in all 11 cities in their composite index rose for a second month in a row.
Commodity prices continue to also climb. Lumber prices have climbed 50% year to date and soared more than 255% since a year ago. Oil prices have increased 39%, copper prices more than 30% and aluminum, natural gas prices more than 20%. Gold prices, which had been lagging the climb in commodity prices has started to rally climbing 9% over the last three months.
US 2021-Q1 GDP, at 6.4% was not revised in the second estimate which leaves the US economy $166 billion below the $19.3 trillion peak of 2020-Q1. However, this is approximately $770 billion below the pre-pandemic trend. Business Investment and Net-Imports both subtracted from GDP in quarter one. Household Consumption, fueled by government stimulus, accounted for the majority of Q1 growth.
Canada’s 2021-Q1 GDP, scheduled for release on June 1 is expected to come in at 6.5%, following a 9.6% increase in 2020-Q4.
The cryptocurrency market hit a wall in May declining from a market cap of more than $2.4 trillion to just over $1.6 trillion. Bitcoin, the most popular of the more than 5000 cryptocurrencies has declined around 40% since its peak on April 15. The majority of this decline came after Tesla reneged on taking bitcoin as payment on its cars due to the climate impact of the mining process.
The biggest data buzz in May was around inflation. The US Consumer Price Index increased 4.2% from a year earlier had some investors concerned this high reading would start to tip the Fed and other central banks to start tightening policy, including raising interest rates earlier than previously expected. However, most central bank officials have reiterated that this increased inflation is a result of base effect (the decline in 2020) and transitory factors, such as bottlenecks in the supply chain due to Covid-induced lockdowns.
Our Pandemic Reset Index charted below shows that economic activity in some of the sectors most impacted by the lockdowns has almost returned to normal in the US. Canada, although lagging the US, is also starting to emerge from the lockdowns with plans in many provinces to fully resume by mid to end of summer.
To gain a ‘real-time’ view of economic activity we created the Pandemic RESET Index. The RESET (Real Economy Statistical Evidence Tracker) Index includes: Consumer outlook (The Bloomberg Comfort Index), unemployment data (US continuing Unemployment Claims), merchandise retail sales (The Johnson Redbook Index), travel data (TSA Checkpoint data), restaurant reservations (open table), total box office revenues (Boxoffice mojo).