Market Pulse

It was a winning May, with the major benchmarks registering a sixth positive month in seven. The Dow added 2.3% this month, while the S&P 500 rose 4.8% and the Nasdaq gained 6.88%.  Solid performance that flies in the face of the popular Wall Street adage, “Sell in May and go away.” 

Historically speaking, the S&P 500 averages a decline of 0.1% in May and is typically the second worst-performing month of the year.  However, the Sell in May strategy hasn’t had a good run in recent years.  Since 2012, the S&P 500 has risen 10 times out of 12 by a median gain of 3%.

Which begs the question, does a solid May increase the odds for a summer rally? Of course, macroeconomic factors including inflation reports, jobs data, and remarks by Federal Reserve Officials will play a role in the markets overall direction.  The market’s current momentum increases the odds of a potential summer rally.

A key factor remains on when the Fed may start cutting interest rates.  It’s interesting  because if you read the headlines, you would think very little is happening in markets and that everyone is waiting with bated breath for them to make a big rate cut announcement.  But quite frankly, the data continues to come in at levels that just doesn’t support it yet.

The key inflation report or core personal consumption expenditures price index, increased 0.2% in April.  It was the same figure that was anticipated, and on an annualized basis, it rose 2.8%, which was slightly above the 2.7% predicted. While inflations remains above the Fed’s preferred level of 2%, The U.S. economy added 272,000 jobs in May, countering fears of a slowdown in the labor market… and again reducing the likelihood of the Fed lowering interest rates in the summer months ahead.

Currently, the expectation is that the Fed will start cutting rates before there is any significant evidence of weakness, but identifying that key time to make a move is getting harder and harder to figure out. On the one hand, you can see how a big jobs report like we just had can cause them to pause, but then consumer spending is showing signs of weakness. It rose 0.2% last month, but after factoring in inflation, spending actually fell slightly.  We also recently got a downward revision to the first-quarter GDP report, moving it down to 1.3% from 1.6%. The tricky part is that when the economy slows, it helps tame inflation.  So, it’s a case of bad, or worsening news, can be good news.

Overall, we expect the market to get a little choppy in the months ahead as the election heats up and investors continue to watch for any signs from the Fed.   We feel there are still opportunities in fixed income by locking in higher yields, particularly on bonds with maturities of 1- 2 years.  Utilities continue to shine bright, not only as beneficiaries from AI’s demand for electricity, but also a great defensive play should the economy continue to slow.  Real estate stocks and ETFs are also on the radar as the sector is down 7% YTD, and likely to bounce back once interest rates start to go down.  But we won’t be holding our breath in hopes then Fed saves us. Instead, we will work to capitalize on the opportunities for higher income and long-term growth opportunities.

Father’s Day Special

Happy Father’s Day to all the dads, the not yet dads, the stepdads, the moms who are dad, the adoptive dads, the grandads, the pet dads, and the dads who are no longer with us.

Father’s Day Quotes

“Fathers just have a way of putting everything together.” Erika Cosby

“You can tell what was the best year of your father’s life, because they seem to freeze that clothing style and ride it out.” Jerry Seinfeld

“A father carries pictures where his money used to be.” Steve Martin

“It doesn’t matter who my father was; it matters who I remember he was.” Anne Sexton

Dad Jokes:

Who is Little Caesar’s dad?  Papa John

What did the daddy buffalo say to its son before it left for school?  Bison

When does a joke become a dad joke? When the punchline is apparent!

What does a baby computer call its dad? Data

What did the papa cow say to the baby cow? It’s pasture bedtime

What do you call your dad when he falls through the ice?  A POPsicle!

One-liner’s About Dad

My dad’s computer caught a cold. He must have left a window open.

My dad said he wanted something groundbreaking for Father’s Day. I got him a shovel.

My dad wanted to listen to music while we were fishing. So I put on something catchy.

Dad Wisdom

Dear Dad,
$chool i$ great. I’m making lot$ of friend$ and $tudying hard. I $imply can’t think of anything I need, $o ju$t $end me a card, a$ I would love to hear from you.
Love, Your $on

Dear Son,
I kNOw astroNOmy, ecoNOmics and oceaNOgraphy are eNOugh to keep even an hoNOr student busy. Do NOt forget that the pursuit of kNOwledge is a NOble task, and you can never study eNOugh.
Love, Dad