No Signs of “Sell in May”

North American markets continued to climb to new heights during the month of May. Energy stocks were among the leaders of the pack thanks to surging oil prices, while names like NVIDIA helped boost the all-important Technology sector. The Health Care sector retreated, as Abbott Labs, who manages rapid Covid-19 tests, faced pressure from accelerating vaccine rollouts. The U.S. economy added 599,000 jobs in May, staving off fears of a slowdown, but falling short of the blockbuster recovery numbers that had once been expected to accompany growing vaccinations and an easing pandemic.
 
The concentrated TSX index has once again helped it outperform major equity indices worldwide, benefiting from an overweight in Energy stocks as oil prices continued to be boosted by stronger demand outlook and OPEC production cuts, while the Canadian banks marched on to drive the Financial sector higher. All this against an abysmal jobs picture, as the Canadian economy lost 68,000 jobs in May, 2021, putting the country’s jobless rate 3% below the pre-pandemic levels seen in February 2020.
 
At the time of writing the TSX is now pushing a 15% return YTD at 14.9%, and the S&P 500 is 12.6% YTD, but in reality with the rapidly appreciating Canadian dollar the S&P 500 is really only up 6.78% in Canadian dollars. Even though, the U.S. is demonstrating a much healthier profile with both the ISM Manufacturing and Services indices surpassing expectations; the service activity notably reaching its highest level on record. Not surprising, Real Estate continued to benefit from reopening optimism and now ranks third in YTD sector performance.

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