Active growth of US markets may slow down in May

All month the US market was under the impression of the announced in March at once . Recall that on March 11, 2020, the third stimulus package for $1.9 trillion was adopted in the U.S. On March 31, Joe Biden presented an 8-year infrastructure plan for $2.25 trillion.

Such active government assistance to both individual households and sectors pushed US indices to new highs. Thanks to these measures, an accelerated recovery of the US economy is expected in 2021/22. Moreover, Fed officials forecast that US GDP growth as a result of post-pandemic recovery in 2021 could exceed 7% for the first time since 1984.

The second topic of the month was the reporting season for the first quarter. During the last two weeks of April, many major corporations, such as , , eBay, Alphabet, , , , , , , , , Exxon Mobil, Chevron, , General Electric, Caterpillar, Visa, Starbucks, , , , Johnson & Johnson, Schlumberger, , , AT&T, Verizon, Procter & Gamble, American Express, Lockheed Martin, Abbott Laboratories, Freeport-McMoRan and many others managed to publish their financial statements.

In May, the landmark reports of major corporations are expected to continue, including ViacomCBS, Alibaba, , Airbnb, Applied Materials, Coinbase, Walmart, Home Depot, Baidu, Cisco Systems, and JD.com. So far, just over half of the SP500 index companies have reported their financial results and in 86% cases . If the trend of rising corporate profits is supported by other companies, the average revenue growth rate could be the fastest in a decade.

Investors in May will continue to assess the effect of the $1.8 trillion support plan for American families announced by Biden on April 28. The money is planned to be allocated, among other things, to improve access to education and leave for workers paid up to $4000 per month.

On the other hand, markets are sensitive to any information about ways to finance similar bailout packages and react with sell-offs. Earlier, the US President has already announced an increase in the corporate tax rate from 21% to 28% and an increase in income tax for individuals earning more than $400 thousand per year. It also became known that for people earning more than $1 million per year, the maximum rate on capital gains and dividends will increase - from 20% to 39.6%.

Market participants also fear that after the strong growth of US indices since the beginning of the year, the stock market is overbought and may enter a correction phase. Especially since May, in terms of historical dynamics, shows one of the weakest results of the year.