COVID-19 Week in Review

Month-in-Review: May 2021

Quick Takes

● Heavyweight bout. Much of May was a battle between rising inflation fears and growing optimism from the U.S. economic recovery. Overall, though, the data points to an economy, and corporate earnings picture, that remains in an upswing.
● All’s well that ends well? There were no corrections in May, but trading was choppy. In both the second and third weeks of the month the S&P 500 traded more than ‐4% below the May 7th all‐time high, yet closed May just ‐0.7% off the record. In 11 of May’s 20 trading days, VIX was above 20 but ended at 16.8.
● Everybody’s still a winner. For the second straight month all major asset classes had positive returns, although May’s gains were more modest. Both U.S. and developed international equities are up double digits in 2021, and U.S. real estate is up +18.1%.
● Fixed income was flat. Bonds rose in May, but just barely. The best performers were Treasury‐inflation protected securities (TIPS) and investment‐grade bonds. After a rapid rise in Q1, the 10‐year Treasury yield spent April and May almost entirely in a range between 1.5% and 1.75%, closing May at 1.58%.

Asset Class Performance

May was defined by positive, yet modest, gains for all major asset classes. International developed and emerging market equities led in May. International bonds also finished ahead of U.S. bonds as the U.S. dollar fell further.

Vaccinations & Improving Economy Have Investors Smiling

COVID‐19 trends continue to make material improvements on virtually all fronts. The U.S. has administered over 295 million vaccines, with more than 40% of the population now fully vaccinated. The 7‐day average of new positive cases has declined to the lowest levels since the start of the pandemic and are now down ‐94% from their January highs. The 7‐day average of deaths per day is now under 400, ‐88% from their January highs. The percentage of positive COVID‐19 tests in the U.S. fell below 2% for the first time, a new pandemic low. With all the progress on the vaccination and COVID‐19 case fronts states and businesses began to fully reopen. That has resulted in a U.S. economic recovery unlike any in recent history. Consumers have trillions in extra savings and stimulus funds, banks have amassed capital, business are eager to hire and restock inventories, and new businesses are being established at the fastest pace on record. That all has investors in an optimistic mood. Rather than “Sell in May and Go Away”, investors sent the S&P 500 to new all‐time highs on May 7th while the Cboe VIX volatility index fell to 16.7, near its lowest levels since early 2020. But the remainder of May was a battle between the bulls and bears as the speed of the recovery led to bouts of inflationary scares and shortages of goods, raw materials, and workers. Private sector wages and salaries are up a staggering +19.4%in the past year and are now +5.5% above pre‐COVID levels. Consumer spending was the biggest driver of real GDP growth in Q1, including spending increases for motor vehicles and parts that increased +66.2%, durable goods that rose +48.7%, and food services and accommodations

that jumped +26.6%. Gains like those, even off the extraordinarily low bases from the depths of last year’s COVID lockdowns, are bound to create inflation concerns. U.S. stocks pulled back more than ‐4% from the May 7th all‐time highs in both the second and third weeks of the month, and VIX volatility spiked to about 28 and 26 on each of those declines. But in the end the bulls took the victory as investors pushed aside the inflation fears in favor of recovery optimism. The S&P 500 rose +0.7% to post its fourth consecutive positive month, and sixth of the past seven. The small‐cap Russell 2000 index, which is more leveraged to the economic reopening, posted its eighth straight positive month for the first time since 1995.

Importantly, vaccination rates in Europe have picked up after a relatively slow start. That has helped Eurozone economic sentiment improve for four straight months and hit its highest level since 2018.The COVID crisis in India has also made much needed progress with over 190 million vaccines so far administered–only behind the totals of US and China. As a result, those economies are also rebounding nicely. As seen in the chart above, both developed and emerging international PMIs are rising and are well into expansion levels (above 50). The MSCI EAFE Index gained +3.3% in May, outperforming U.S. stocks for the first time in 2021.

Bottom Line: Global equities rallied for the sixth time in seven months as vaccinations helped accelerate the recovery for most countries. Ongoing fiscal stimulus and improving earnings also boosted investor confidence.

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©2021 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.

Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2021 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.


Q1 Quarterly Update

From Bull to Bear
Most importantly, please know our hearts go out to all of those impacted from the COVID-19 pandemic, especially those that have fallen ill, and those who find themselves suffering during this truly unprecedented fallout.

As we entered this new decade, we had done so with a cautiously optimistic outlook. The market benefited from a powerful rally at the end of 2019, driven by a “phase one” trade agreement with China, low interest rates, and a robust labor market. Analysts were forecasting a return to higher growth rates for corporate earnings, recessionary fears were fading, and stocks were reaching for all-time highs. The cautious optimism instantly eroded as the Coronavirus (COVID-19) quickly turned from a China-isolated epidemic to a global pandemic of frightening proportions. As the case count soared and containment failed, markets began to rapidly assess the economic impact that social distancing measures would have on the global economy; bringing many countries and industries to a grinding halt and impairing the global supply and demand chains. With the markets’ assessment and rapid sell-off, in what felt like a blink of an eye, the equity markets entered into a bear market, bringing our country’s longest bull market in history to an end in March. As if a global pandemic was not enough for markets to grapple with, a price war between Russia and Saudi Arabia coupled with an abrupt lack of global demand caused oil to turn in its worst quarter ever. With the market now dealing with not one, but two exogenous events, investors ran for the door, looking to sell risk assets as quickly as possible. The S&P 500 fell by as much as 34% from its highs before rallying to close the quarter off -19.60%. The Dow Jones Industrial Average officially registered its worst first quarter in history, finishing down -22.73%. Small caps fared even worse, as the Russell 2000 cratered -30.61%.

With the Coronavirus originating in China, the world’s second largest economy was forced to shut down for most of the first quarter. Unfortunately, many developed international countries were already on fragile ground and rely heavily on China for imports, causing increased strains on frail economies trying to combat COVID-19. These pressures sent the MSCI EAFE and MSCI Emerging Market indexes down -22.72 % and -23.57% in the first quarter, respectively.

During times of uncertainty, many investors sell equities and flock to the safe haven of bonds. As fears grew that the impact on global capital markets could be more severe than ever imagined, investors attempted to unload nearly any security-possessing risk. Though they mounted a comeback to close out the quarter, even investment grade corporate bonds were not safe from the storm and experienced selling pressure; with the iShares iBoxx Investment Grade Corporate Bond ETF selling off more than 3%. YTD. The only place to hide was cash or U.S. treasuries. Given the heavy allocation to U.S. treasuries in the benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index was one of a few bright spots, delivering a positive return of 3.15%

Unprecedented Market Movement
In normal times, the market may take two to three months to earn a return of 5%, yet the average daily price swings in March were almost +/- 5%. Investors witnessed the market fall more than 12% in a single day, marking the largest single day move since the 1987 Black Monday crash, only to be followed by gains greater than 11%, marking the best day since 1933. The market hit its peak on February 19, 2020, but a mere 16 trading days later, the market would fall more than 20%, officially entering a bear market in the quickest fashion. To put that pace in perspective, from 1950 to 2019, on average, a bear market took 401 days to reach.

While volatility in the first quarter was truly unprecedented, markets have endured disruptions and crises in the past. Since 1989, the S&P 500 experiences average intra-year declines of -13.5% annually, and has finished the year in positive territory 81% of time; averaging a positive 12.1% per year. We’re not suggesting that 2020 will see the S&P 500 end in positive territory, but it’s simply a reminder for investors that volatility is normal and we need to try our best to control what we can – focusing on the long-term.


Unprecedented Job Loss
As mentioned above, we entered this crisis with a very robust labor market, as the unemployment rate sat at a 50-year low near 3.5%. Just as our nation’s longest bull market came to an end, as did the streak of 113 consecutive months of job growth, with unemployment jumping to 4.4%. March’s job report officially registered a loss of 701,000 jobs, but the data collected was only through the week ending March 12; before the nationwide lockdowns and social distancing mandates were enforced. Sweeping shutdowns drove unemployment claims to weekly all-time highs of more than 6.6 million in each of the past two weeks in late-March and early-April, bringing the last three-week tally to more than 16.5 million jobs lost. To put that in perspective, the highest weekly total in the 2008-2009 Financial Crisis was approximately 665,000. With these numbers only trending upward, it’s understandable why Bloomberg is projecting unemployment in April will approach 15% or higher. Hopefully, the elevated rate of unemployment will be somewhat transitory. As lockdowns are lifted and a normalcy returns, a good portion of the jobs lost will be regained. Service industries such as restaurants, retail, and hotels will rehire many, but not all, of the employees laid off. Additionally, many of the small, medium, and large businesses accepting loans under the recent government stimulus package will be required to maintain minimum employment levels. However, our economy has not endured an actual shutdown of this magnitude, so the longer-term impact on employment remains difficult to predict.

Unprecedented Government Stimulus
To help combat the unprecedented levels of unemployment and keep the economy afloat, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The total size of this package exceeds two trillion dollars, which represents over 9% of U.S. annual GDP. Comparatively, the fiscal stimulus during the Financial Crisis was $800 billion, making the CARES Act 250% larger. While every day without an agreement felt like an eternity, in reality, the CARES Act was the quickest stimulus package ever to receive approval through Congress. Key provisions are highlighted in the chart below.

The CARES Act is intended to help consumers and displaced workers through enhanced unemployment benefits and direct payments, but also to provide a lifeline to both small and large businesses that have been impacted through largely no fault of their own. With the goal of aiding small and large businesses, in looking at the loan and grant stipulations, it appears Congress’ intentions had the individual consumer front and center. Stipulations such as maintaining minimum levels of pre-COVID-19 employment, capping executive compensation, disallowing the payment of dividends on common stock or buying back outstanding shares highlight Congress’ desire to ensure people get back on their feet, and stay on their feet. Before president Trump’s ink could even dry, politicians already started whispers of additional fiscal stimulus requirements; with some predicting the government spending reaching upwards of six trillion dollars, or roughly 27% of US GDP, to combat the fallout from the coronavirus.

Unprecedented Monetary Stimulus
In a surprising action on March 3, the Federal Reserve was the quickest to respond to combat the economic fallout from COVID-19. While typically more reactionary and measured in their approach, the Fed took aggressive proactive measures making their largest single rate cut of 0.50% (or 50 basis points) between scheduled Federal Open Market Committee (FOMC) meetings; the first time the Fed had taken such measures since the 2008 Financial Crisis. Less than two weeks later, again between scheduled meetings, the Fed dropped the rate on the Fed Funds effectively to zero. As the fear of the economic fallout escalated and oil continued to plummet, investors tried to sell nearly any asset containing risk; including any bond that wasn’t a treasury. While there were plenty wishing to sell, there were only a few looking to buy, creating an extraordinary dislocation across most bond categories. In order to bring back liquidity, the Fed again engaged in unprecedented measures by not only purchasing treasury securities and mortgage-backed securities, but for the first time ever, also stepping in to support municipal bonds, agency securities, and even corporate bonds through the purchase of Exchange Traded Funds – truly unprecedented. The Fed’s QE bond buying program has already seen the Fed’s balance sheet grow more than one trillion dollars; pushing their total balance sheet size above five trillion dollars. The Fed has failed to put a limit on the extent of their bond buying, leaving the amount available open-ended, but they have already purchased more in one day now than in an entire month during the Financial Crisis (80 billion).

As part of the CARES Act, the Treasury Department is looking to the Federal Reserve to create the large business lending program, in which $454 billion is earmarked for the joint program between the Fed and Treasury. This is an important point because under the authorities granted to the Fed under the Federal Reserve Act, which predates the CARES Act, when the Fed declares that circumstances are unusual and exigent, and the Treasury agrees, the Fed can set up special programs that essentially buy debt from, or extend loans to, large and small businesses. Rather than the Fed simply printing the money and taking on additional credit risk, the Fed leverages the Treasury to insure against losses. Given that the Fed expects most loans to be repaid, the Treasury provides more than a dollar for dollar support, otherwise the actual lending power under the loan program would indeed be $454 billion. However, the Treasury gives the Fed a 10 to 1 ratio, giving the Fed actual lending authority up to $4.5 Trillion dollars under this loan program. Through the Fed’s bond buying program and their CARES Act lending, the Fed’s balance sheet is expected to balloon from the post Financial Crisis lows of around $3.5 trillion to just under $13 trillion. Perhaps drawing on lessons learned, the combination of the CARES Act and Federal Reserve action now dwarfs the governmental stimulus response throughout the entire Financial Crisis in 2008-2009.

Moving Forward
While the market’s focus is currently pinned to every headline surrounding the Coronavirus and/or an end to the Russia and Saudi Arabia oil price war, that focus will quickly turn to company earnings in the coming weeks. The current environment has made valuing a company extremely difficult. Many companies have already suspended providing guidance through 2020; a trend which will likely continue. Some analysts are projecting earnings contractions in line with the 40%+ contraction experienced during the Financial Crisis, along with dividend cuts greater than 20%. We wouldn’t be surprised to the see companies look to throw out the kitchen sink during the upcoming earnings releases, blaming every negative data point on the shutdown caused by COVID-19. With extremely negative results expected, we anticipate rather than focusing on whether a business beat or missed estimates, that the street will be focused on a forward-looking guidance that senior leadership provides.

Given the level of uncertainty around upcoming data, predicting the path forward for the economy is difficult. The depth and duration of the recession is more reliant on medical progress than anything else. The quicker the spread of COVID-19 can be contained, flattening the curve, the quicker the economy can begin to get back on its feet. Once stay-at-home mandates are lifted, many expect everything to snap back to normal. Our view is a bit more cautious. Unlike other nations, such as China, that may drive more of their revenue from manufacturing and exporting goods, the U.S. net imports and 68% of our economy comes from business and retail consumption. A big question remains as to how the consumer will respond once the stay-at-home restrictions are lifted. The U.S. Government has tried to help fill the void with more spending, and rumors are flying about a potentially historic infrastructure package, but to avoid a deep recession, we have to help maintain the strength and confidence of the everyday consumer, which is why we believe the CARES Act, along with additional expected stimulus, is so critical.

After 2019’s large gains across most major asset classes, we performed significant rebalances moving back to target weights in our portfolios, effectively taking some risk off the table. We also continued to emphasize quality across our portfolios, including underlying managers who have demonstrated successful track records of participating in up markets, but more importantly protecting on the downside. In March, we were able to capitalize on the lower prices by opportunistically rebalancing portfolios again, reducing bonds and increasing our equity allocations back to their intended target weights. Many segments of the market experienced significant dislocation, resulting in both temporary and permanent impairments. As such, during our rebalancing, we took the opportunity to reduce asset classes facing more lasting concerns, and increase our exposure to asset classes demonstrating stronger balance sheets, more robust earnings, and viable access to credit. When events unfold like we’re currently experiencing, it’s easy to panic. One of our responsibilities is to remove emotion from our investment decision-making process, striving not to make knee-jerk reactions. Especially, in the absence of complete data, we believe it would be imprudent to make rash or sweeping investment changes at this time. We will remain committed to a diligent process in efforts to bring our clients consistent long-term results.

Finishing as we started, please know that our hearts truly go out to all of those impacted from the COVID-19 pandemic, especially those that have fallen ill, and those who find themselves suffering during this truly unprecedented fallout. Here’s to hoping for a return to normalcy in the very near, not-so-distant future.

Click here to download the Q1 Quarterly Client Update

Chris Osmond, CFA, CFP®
Chief Investment Officer
Investment Advisory Committee
[email protected]

Eric Krause, CFA
Portfolio Manager
Investment Advisory Committee
[email protected]

The preceding commentaries are (1) the opinions of Chris Osmond and Eric Krause and not necessarily the opinions of PCIA, (2) are for informational purposes only, and (3) should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”) and Prime Capital Wealth Management (“PCWM”).

COVID-19 Press Releases

Update from our CEO: A Different COVID-19 Message

This week’s news that cities, counties and states will tighten “social distancing” and “stay at home” orders will continue into May was unimaginable several weeks ago. The “models” all forecast that COVID-19 in the United States is expected to worsen over the next two weeks before hopefully beginning to take a positive turn.

Our obvious first concern is for the health and safety of our clients, our associates and their loved ones. This crisis has crystalized what each of us knows in our hearts; it’s the people in our lives and our relationships that mean the most to each and every one of us. This is clearly a challenging time for our nation. With this said, my hope is that some good will come from this tragedy. During this humanitarian crisis, so many people have shared the fact that they have gained or regained perspective around what is truly important in their lives. Additionally, I have read and heard so many stories of people helping one another. Let’s hope that perspective is gained, and divisiveness is tempered as this crisis dissipates.

While our country is clearly being challenged during this health crisis, we are also experiencing an unprecedented financial crisis. Our clients need advice during these challenging financial times; and our friendship, counsel and expertise is needed now more than ever. In this regard, I am incredibly proud of how our people have responded to their trusting clients’ needs. We continue to provide timely and relevant information via our semi-weekly webinars, social media broadcasts, daily written communications to our clients, and personal touches from our advisors and their teams. We have risen to the occasion and we will continue to be there for you.

Abraham Lincoln pleaded towards the end of the Gettysburg Address that the dead “shall not have died in vain”. And the renowned musician, Sting, is quoted, “I do my best work when I’m in pain and turmoil.”

Let’s not let this pandemic pass in vain – let’s find ways to be better as human beings. And I’ll leave you by confidently stating that during this crisis, we will do our very best work for you.

Take care of yourself and your loved ones.



Glenn Spencer

COVID-19 Press Releases

Update from our CEO: Trust in Times of Uncertainty

This is a truly unprecedented time in history. There is no need to supply you with data or statistics that you hear all day, every day on the news channel of your choice.

When this story is over, I’m more confident than ever that you will be incredibly pleased that you have a relationship with our firm. I know that your advisor has been a trusted voice to each of you and that our company has provided you with timely and relevant counsel.

Our experience provides us with clarity in times like this. First and foremost, people are concerned about their families, friends and coworkers – they want safety and health for loved ones. Next, people want to have optimism for their future. They want to feel a sense of security that creates peace in their hearts. Beyond that, it’s really hard to predict. In times like this, everyone experiences feelings, thoughts and concerns that are unique to them.

Knowing that each person reading this has individual emotions, we know that you cherish TRUST. Trust that we have your interest above anything else. Trust that we care about “you” and “your business.” Trust that we are really good at what we do. Trust that we are “on our game” at this time. We honor and respect your trust and will never take it for granted.

While none of you live inside our four walls, these are just a few of the actions we have taken to continue earning trust:

  • Our Investment Advisory Committee (IAC) is talking daily and meeting weekly to assure that we are effectively managing our clients’ investments.
  • Our research and investment teams are working continuously to assure that we have the best, and most up-to-the-minute information to make decisions.
  • Our disaster recovery plans have allowed us to operate seamlessly.
  • Our client communications have increased to assure that you are well informed.
  • We have delivered more virtual education sessions for our clients than in prior history of our company.

With this said, the ultimate trust you have in our firm rests with your trust for your advisor. We are confident that you are well served in this regard.

We wish everyone good health and peace of mind during these challenging times.



Glenn Spencer

COVID-19 Press Releases

Update From Our CEO: COVID-19

Our firm’s vision is to inspire people to achieve their life’s ambitions. We understand that given that current state, it is very difficult for our clients to stay focused on their long-term life objectives.

This global health challenge is causing tremendous financial volatility and uncertainty. Although this situation is unique, investment volatility and dramatic market decreases due to world events is not. Over the past twenty years, the U.S. has experienced the Dot-Com Recession, the events of 9/11 and the Great Recession of 2008-2009. Over this same period, we have been challenged with multiple Venezuelan financial crises, the European Debt Crisis, Russian Financial Crisis, Brazilian Economic Crisis and the Chinese Stock Market Crisis outside of the United States. Be confident that our firm has expertise in managing through times of uncertainty and volatility with our clients.

Our role is to proactively provide excellent information and to be available to our clients that are in need of advice. I am extremely pleased with the quality of our firm’s communications over the past several weeks as this crisis has evolved. You should continue to expect invaluable communication from our firm’s investment professionals and your advisor.

I wanted to provide each of you with additional information about operational measures our firm has taken as this situation has evolved. I would summarize by stating that we are first and foremost focused on the health and well-being of our people and our communities. Our next concern is being available to our clients and proactively providing them with quality information and advice. To this end, below is a summary of the actions we have taken:

  • Suspended all non-essential client travel beginning on March 11
  • Cancelled all internal meetings requiring travel through the month of April
  • Required advisors and associates to quarantine for 14 days when returning from certain international travel
  • Enhanced our capabilities to conduct effective virtual meetings
  • Encouraged advisors & associates to conduct virtual meetings
  • Established procedures to ensure that advisors and associates are not at risk when meeting with clients
  • Stressed the importance of practicing recommended “social distancing” procedures in order to assure our communities are safe
  • Enhanced our business continuity processes and procedures to assure that client service is not disrupted while our people are working remotely
  • Ensured that our business partners are prepared to continue meeting our client service needs
  • Encouraged advisors and associates to begin working remotely after March 15

Given the modifications we have made to our business, we are confident in our ability to not only serve our clients’ needs, but to proactively engage with them to assure that they are receiving quality and timely information.

We encourage each of you to do everything possible to protect yourselves, your families and your communities. Thank you very much for your trust and we work through these challenging times.



Glenn Spencer