Hello all - we hope you had a nice May.
Markets felt a little more normal this month and stocks saw a solid rise. For May, Dow gained 3.9%, the S&P 500 rose 6%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 9.6%.
Markets felt a little more normal this month and stocks saw a solid rise. For May, Dow gained 3.9%, the S&P 500 rose 6%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 9.6%.
Both the S&P and Nasdaq had their best month since 2023 and the S&P had its best May since 1990!
Here’s a look at how the markets moved this month:
Here’s a look at how the various sectors performed:
Volatility rose sharply last month, but cooled considerably in May.
Bonds made headlines early this month as yields rose and some investors were concerned it signaled trouble ahead. However, yields turned lower later in the month and the fears were alleviated.
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TARIFFS
The tariffs were again front and center this month. The rhetoric coming from Washington was a bit calmer which allowed markets to rise.
Tariff rates were lowered on China as the negotiations continued and markets rose on the news.
Markets fell, however, on threats for higher tariffs on EU countries.
A court ruling against the tariffs also had a positive effect on the markets. However, it looked like it would be possible for Washington to find other ways to authorize the tariffs, so the gains were short-lived.
Markets fell, however, on threats for higher tariffs on EU countries.
A court ruling against the tariffs also had a positive effect on the markets. However, it looked like it would be possible for Washington to find other ways to authorize the tariffs, so the gains were short-lived.
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FED
The Fed held another policy meeting this month where they held rates steady again.
Investors are still expecting rate cuts this year, with the market pricing in more than two cuts between now and the end of the year.
We think it is very unlikely there will be two cuts by the end of the year. We doubt there will be any cuts at all, which will be a disappointment for investors and could weight on the market.
Though the Fed likes to tout its independence, they are all highly political, far-left leaning academics. We think politics alone will be the reason preventing them from agreeing with anything in this administration.
Though the Fed likes to tout its independence, they are all highly political, far-left leaning academics. We think politics alone will be the reason preventing them from agreeing with anything in this administration.
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INFLATION
Inflation still appears to be trending lower, but concerns remain as the tariff effects have yet to be truly felt.
When we look at inflation on a month-to-month basis, prices rose slightly.
When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose slightly, too.
Eggs prices had been a hot topic, but those prices showed a strong decline last month. This is probably why we haven’t heard much about them in the press.
Another good sign was inflation at the business level, which showed a decent decline. This inflation level tends to lead the CPI, so perhaps we’ll see a cooling in prices at the retail level soon.
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ECONOMY
After a negative GDP report for the first quarter was released last month, investors have been worried that a recession may be approaching. However, estimates for the next GDP report actually showed a strong increase.
A lot of the reason for the decline in the last GDP was companies importing a lot of products before the tariffs hit. Imports are counted as a negative for GDP, and this alone is the reason for the decline in GDP. That isn’t this case this quarter, so things may not be as bad as they seem.
We still see some concerns out there, though. While the fundamentals still look decent, we think the high prices people face everyday may eventually take their toll. We’re seeing people getting behind on their credit cards and car loans, and this can be the canary in the coal mine.
We still see some concerns out there, though. While the fundamentals still look decent, we think the high prices people face everyday may eventually take their toll. We’re seeing people getting behind on their credit cards and car loans, and this can be the canary in the coal mine.
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OTHER ECONOMIC DATA
Other economic data released this month was mixed.
The manufacturing part of our economy saw another decline, while the service sector showed an improvement.
Retail sales rose slightly.
Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a slight increase.
Consumer confidence saw a nice bounce after plunging the previous month.
However, confidence among CEO’s dropped sharply.
Small business owners, too, were less optimistic.
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EARNINGS
Earnings for the first quarter have largely wrapped up and the results have been very good.
Analysts predicted a 7% gain in earnings for the companies in the S&P 500, but the final result was a 13% gain. That’s pretty good. However, there remains a concern going forward. The outlook has been very cloudy and there remains a lot of worry, so the bar has been set very low.
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Where does the market go from here?
The market remains driven by comments from Washington, so it’s hard to make any predictions here. The market looks a little expensive here in the short term, so we’d be more cautious at this point.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
