Domestic (U.S.) equities struggled in May with most companies flat or down on the month save for a few tech names. It’s worth noting that last year’s laggards appear to be this year’s stars.
Value companies mostly underperformed relative to growth companies, while small companies lagged larger companies on the month.
Global equities generally declined except for Japanese equities which enjoyed a positive return of nearly 2% on the month.
Bond prices mostly declined in May after positive returns for most of the year in the face of a resilient economy and a determined Federal Reserve. U.S. Treasury bill yields briefly rose above 6% as the debt ceiling crises came close to the “X-Date” at month end.
Headline inflation continued to slow and supports the notion that the Fed’s efforts may be working. Home prices declined on a year over year basis despite low inventory levels in many parts of the country.
Fed meeting minutes indicate that many Fed members are anticipating further hikes despite cooling inflation and a softening – yet still resilient — economy.
Relative to other economies, the U.S. strengthened with the U.S. Dollar index increasing for the month despite pulling back over the past year or so from record highs last fall.
Investors of all backgrounds seem divided – perhaps more than ever – on whether we are entering a recession. It’s my opinion that the more we talk about a recession, the less likely we are to experience one (or a severe one at that). I continue to believe that it’s the risks we don’t see that offer the greatest potential harm.
As was largely expected, the government passed a debt ceiling resolution for the 71st time in our nation’s history, effectively kicking the can down the road until after the 2024 Presidential election.
With election season in full swing, we can expect to hear lots of reasons why America is broken and in need of substantial repair. While I submit that we always have opportunity for improvement, there are lots of reasons to remain constructive, not just on America, but on economies and businesses around the globe. To wit, last fall investors had little reason to be optimistic – yet the markets have rallied nearly 20% since then.
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