S&P 500 Margins Hit Record High, Crypto’s Wild Week, and the Hunt for Dividend

Major U.S. indices broke a three-day losing streak yesterday, sparking hope that stocks could close a volatile week on a positive note—and almost certainly a sigh of relief from highly leveraged investors who’ve helped push net margins in the S&P 500^® Index to a record high in 1Q21. And the volatility hasn’t been limited to stocks; cryptos came under pressure this week and have been experiencing a wild ride of their own. Bitcoin has stabilized slightly after falling to $30,000—its lowest point since January—and experiencing its largest single-day drops since the onset of the 2020 bear market. But when single tweets can move markets, the path ahead is unclear. Meanwhile, as investors increasingly look to dividends for income in this low-yield environment, how do dividend yields compare across indices? And is the commodities surge beginning to cool off?

1. Many new stay-at-home investors also levered up their portfolios. Now they are learning about margin calls and the risks of leverage:

Source: BofA Global Research, from 5/20/21

2. When tweets from Elon Musk or China’s talking of clamping down on cryptocurrencies drives a market to this extreme, we just shake our heads. Perhaps the price run up was due to investors “gambling” with stimulus checks and they bid up a very thin market?”

Source: The Daily Shot, from 5/20/21

3. A long-term theme of ours. Beware, however, the construct of your dividend index!

Source: S&P Global Market Intelligence, as of 4/31/21

4. The commodity price surge has also seen some air let out of the tire:

Source: The Daily Shot, from 5/20/21

5. Higher energy prices are helping boost European inflation which has been markedly lower than in the U.S.:

Source: The Daily Shot, from 5/20/21

6. An interesting evolution, but we’d love to know what a difference 2020-21 would make to these numbers. Cheers!

Source: Statista, from 5/20/21