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With COVID-19 social restrictions easing and the weather warming, many shifted their focus toward looking forward to a more normal summer. Likely for this reason, along with an absence of major news on new stimulus or tax measures, markets were relatively calm in May. Most major equity and bond indexes remained in a narrow range for the month.

‘Transitory’ Inflation and U.S. Tax Plans

The prospect of sustained inflation has become a hot topic for investors who continue to crave easy money but are increasingly aware of the potential consequences. The Fed continues to view inflation signs as transitory, suggesting more accommodative monetary policy for now. Meanwhile, President Joe Biden’s proposed spending plans and tax increases are facing increased resistance in Congress, increasing the likelihood they are moderated before passage.

Emerging Markets on the Rise

Emerging markets stocks moved higher as investors applauded indications China will seek to contain commodity inflation. Even so, commodities in general advanced for the month with oil approaching a three-year high.

Crypto Loses Steam

Cryptocurrencies and Bitcoin, which began the month enjoying euphoric enthusiasm, lost momentum. Bitcoin shed about a third of its value while other coins fared even worse. We do not believe this correction means much either way for the future of Bitcoin and crypto. For some, it was a good reminder that these assets are volatile and will continue to experience big moves both up and down.

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