Markets
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.
Economy
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.
Politics
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.
Disclosures:
Views expressed are not necessarily those of Raymond James and are subject to change without notice. Information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. International investment involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Raymond James is not affiliated with any of the organizations or persons mentioned above. Raymond James does not provide tax or legal advice.
Sources:
Raymond James
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