In our previous commentary we highlighted the FOMC meeting minutes, noting that “investors will scour the transcript for any cracks in the Fed’s conviction to keep short-term rates near-zero for the foreseeable future.” The surprising dialogue about “tapering” did at least briefly challenge traders’ complacency. The meeting summary stated, “A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases”. Consistent with the market’s incredible resilience, the sell-off was brief and shallow. In fact, the yield on the Ten-Year -Treasury finished unchanged at 1.63%, while the S&P 500 dropped 0.43%, the Russell 2000 slipped 0.42%, and the Nasdaq eked out a gain of +0.31%. The muted reaction could be attributed to the argument from stock and bond market bulls that the softer economic data since that meeting weakens the case for tapering in the near-term. We continue to caution that the more bloated the Fed’s balance sheet gets, the more painful the stomachache of the ultimate unwind.
It was a bitter week for Bitcoin bulls, as the crypto security plummeted almost 25% to reach its lowest level of the year and is now down 5.94% for 2021. Elon Musk tweeted over the weekend that the “true battle is between fiat & crypto. On balance, I support the latter”. That cryptic crypto endorsement created a bit of a bounce back. Our preferred non-fiat “currency”, Gold, was up +2.2% to reach its highest level since the beginning of January, while the dollar continued to drift lower.
The consumer will be in focus with The Conference Board May Consumer Confidence Index on Tuesday expected to show a modest drop from April’s reading, and the May Michigan Sentiment on Friday forecasted to be flat. Also, on Friday the BEA will report personal income and expenditures for April, which is likely to drop sharply from March which had surged 21.1% thanks to government money dropping from helicopters.
Enjoy your Memorial Day holiday. We encourage consumption of the excellent products from some of the companies in the North Star Funds, drink some Dr. Pepper (KDP), eat some Red Hots from Nathan’s Famous (NATH), go fishing and camping (JOUT), play sports (ESCA), watch movies (VIAC), and go cheer on the Knicks (MSGE)!
Stocks on the Move:
We only had one company whose share price moved more than 10%, which I think is the second-lowest number since we started the commentary.
+10.3% AstroNova Inc (ALOT) designs, develops, manufactures, and distributes a broad range of specialty printers and data acquisition and analysis systems, including both hardware and software. Its target markets are apparel, automotive, avionics, chemicals, computer peripherals, and communications. Coincidentally we met with management at the Sidoti Virtual Microcap Conference on Wednesday. The Company has recently made great efforts toward a better product mix between supplies, repairs, and hardware. Additionally, the focus on digital marketing has realized through website upgrades, such as on https://astronovaproductid.com/, which hosts everything from DIY installation videos to proud customer testimonials. Finally, the reinstatement of the Boeing 737 MAX should be a significant tailwind.
ALOT is a 0.7% position in the North Star Micro Cap Fund.
Other companies mentioned:
KDP is a 1.2% position in the North Star Opportunity Fund.
NATH is a 0.4% position in the North Star Micro Cap Fund.
JOUT is a 4.1% position in the North Star Micro Cap Fund.
ESCA is a 4.4% position in the North Star Micro Cap Fund and a 4.4% position in the North Star Dividend Fund.
VIAC is a 2.0% position in the North Star Opportunity Fund.
MSGE is a 0.9% position in the North Star Opportunity Fund.