Hello all - we hope you had a nice May.
Most of the month was tough for investors as markets steadily declined. However, solid gains the last full week of the month put stocks right back to where they started. The Dow and S&P 500 were both flat on the month, rising 0.04%, and 0.01%, respectively. It’s hard to get much flatter than that. The Nasdaq, which has a higher concentration of tech companies, was down 2.1%.
Most of the month was tough for investors as markets steadily declined. However, solid gains the last full week of the month put stocks right back to where they started. The Dow and S&P 500 were both flat on the month, rising 0.04%, and 0.01%, respectively. It’s hard to get much flatter than that. The Nasdaq, which has a higher concentration of tech companies, was down 2.1%.
Here’s a closer look at the markets this month:
Until the last week of the month, the decline in stocks had been historic. The Dow had seen eight-straight weeks of declines, which is the longest weekly streak of declines in 99 years. Really!
The S&P 500 and Nasdaq both had seven-straight weeks of declines, which is the first time that’s happened since 2001.
The S&P 500 and Nasdaq both had seven-straight weeks of declines, which is the first time that’s happened since 2001.
Thankfully, the final week of the month was a large enough increase to wipe out most of the earlier losses.
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The Fed
A lot of concern remains around the Fed as they pull back on their stimulus. The printing of money and rock-bottom borrowing rates has fueled the market rise in recent years, so its only logical for the removal of stimulus to cause the markets to fall.
This month, they raised interest rates again.
A lot of concern remains around the Fed as they pull back on their stimulus. The printing of money and rock-bottom borrowing rates has fueled the market rise in recent years, so its only logical for the removal of stimulus to cause the markets to fall.
This month, they raised interest rates again.
The Fed also made comments that while they would keep pulling back on stimulus, they wouldn’t pull back at a very fast pace. This reassured investors who had feared worse and caused the biggest gain in the markets after a Fed meeting since 2011.
The excitement was short-lived, though. The following day stocks sold off even more than they rose on the excitement.
It appears investors figured that while the Fed won’t pull back on stimulus at a faster pace, they’ll still be pulling back, and they may have to do it for a longer time. Stocks fell sharply as a result.
This is an interesting chart showing how unlikely it is to have such a strong day, only to be followed by such a weak day.
It appears investors figured that while the Fed won’t pull back on stimulus at a faster pace, they’ll still be pulling back, and they may have to do it for a longer time. Stocks fell sharply as a result.
This is an interesting chart showing how unlikely it is to have such a strong day, only to be followed by such a weak day.
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Inflation
Inflation remains a big topic. Data out this month showed inflation finally ticking lower on a year-over-year basis.
Inflation remains a big topic. Data out this month showed inflation finally ticking lower on a year-over-year basis.
On a monthly basis, however, inflation is running high.
The story was the same with inflation at the business level (the PPI), where inflation moved slightly lower on a year-over-year basis.
The monthly PPI readings on inflation look very bad.
While some companies have managed to weather the inflation storm, others have not. Big name retail companies like Wal-Mart and Target saw sharp drops in their stock prices after issuing warnings about high inflation.
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Other economic data
Economic data released this month was mostly negative.
Both the manufacturing and service sectors of the economy continued to decline.
Economic data released this month was mostly negative.
Both the manufacturing and service sectors of the economy continued to decline.
We don’t talk about home sales often, but housing is starting to show some weakness.
Despite (or perhaps because of) record high prices for homes and rising mortgage rates, home sales are slowing. The sale of new homes saw a massive drop and stands at the same level as two years ago. Existing home sales are also starting to show weakness.
Despite (or perhaps because of) record high prices for homes and rising mortgage rates, home sales are slowing. The sale of new homes saw a massive drop and stands at the same level as two years ago. Existing home sales are also starting to show weakness.
Retail sales have been a bright spot as they rose for another week, although this may be because people are spending more for these items.
Durable goods - which are items with a longer life, like a phone or dishwasher – rose higher.
Sentiment among the public moved lower again.
Small business owners continue to be very pessimistic.
The same small business survey noted that inflation remains a big concern for them.
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Where does the market go from here?
We saw a nice rise late in the month, but it put stocks at a level that doesn’t look good for new money, at least for the short term.
It’s too early to tell if this is the bottom for stocks, but a lot of the sentiment indicators we follow show we’re due for a move higher. A lot of the bad news has been priced in and while surprises are always possible, the investing environment looks less scary. We don’t see stocks rising like they did before, but we don’t see the decline continuing, either. We think it might be a rocky grind sideways from here.
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.
We saw a nice rise late in the month, but it put stocks at a level that doesn’t look good for new money, at least for the short term.
It’s too early to tell if this is the bottom for stocks, but a lot of the sentiment indicators we follow show we’re due for a move higher. A lot of the bad news has been priced in and while surprises are always possible, the investing environment looks less scary. We don’t see stocks rising like they did before, but we don’t see the decline continuing, either. We think it might be a rocky grind sideways from here.
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.
