May’s Economy & Stock Market Update

In April, major indices experienced a slight downturn, retracting some gains seen in the first quarter. After reaching a record high in March, the S&P 500 dropped about 4%. Interestingly, while the market broadened out in the first quarter, the average stock, represented by the equal-weight S&P 500, lagged behind the official index as leadership reverted to fewer names.

Treasury bond prices weakened notably, with the 10-year yield climbing to its highest level since November 2023. Additionally, the dollar rose for the fourth consecutive month. This often is a hinderance to stock prices, and April was no exception. Gold prices increased after March’s rally, though they eased off after setting a new all-time high above $2,400/oz. Conversely, oil prices dipped after three successive monthly gains.

As anticipated, the Federal Reserve kept its federal funds rate unchanged at 5.25% to 5.50% during its early May Federal Open Market Committee meeting.  Another of their policies was a bit more dovish, as the Fed is taking action to ease longer-term rates. During the month, markets changed expectations for future rate cuts as data showed stubborn inflation and mixed economic indicators. For example, March’s inflation report was hotter than expected, and payrolls and retail sales surpassed expectations, yet first-quarter GDP (the most common indicator of economic growth) fell short of projections.  These readings sparked “stagflation” concerns, whereby the economy remains flat while prices keep going higher.

Looking ahead, we maintain a positive outlook on the market. Despite some challenges, the economy is buoyed by fiscal stimulus and strong employment figures. As inflation gradually recedes, Fed rate cuts may be on the horizon, potentially supporting higher stock valuations. While market momentum may soften, we view pullbacks as healthy opportunities for consolidation and eventual growth.  Pullbacks like April’s are often viewed as healthy, especially in the absence of bad economic news or market trends being subverted.

As always, we encourage investors to stay informed and patient amidst market fluctuations.  The market will be closed for Memorial Day on May 27, and our advisors will be out that day. 

May is a great month to create (or update) an inventory of your home and personal property for insurance or estate planning. Use your phone to record a video of your valuable possessions, and then store the video in a secure, remote location.  For instance, through your Raymond James online access, you have the ability to upload this video, or any important document, to a secure online location known as Vault.  Look for it the next time you log in.  

As always, these opinions are mine and may or may not be the same as those of Raymond James.  This is not a solicitation to invest, although we do invite you to review your portfolio with us to see if any changes should be made. 

Past performance may not be indicative of future results. There is no assurance any of the trends mentioned will continue or forecasts will occur.  Investing involves risk including the possible loss of capital. Asset allocation and diversification do not guarantee a profit nor protect against loss.  There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.

The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Individuals cannot invest directly in any index.  U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury notes are certificates reflecting intermediate-term (2 – 10 years) obligations of the U.S. government.  Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Scott Mitchell and not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  Raymond James does not provide tax or legal services.  Please discuss these matters with the appropriate professional.