Weekly Commentary (5/20/24) – Markets Drive Higher With Positive Results in All Corners

Equity, Fixed Income and Major Commodity markets finished higher last week as inflation reports were mostly improved.

For the week, the DJIA added 1.35% while the S&P 500 gained 1.60%.  The tech-heavy Nasdaq finished2.15% higher.  For the week, the MSCI EAFE Index was up 1.70% while emerging market equities (MSCI EM) jumped 2.72%.  Small company stocks, represented by the Russell 2000, also moved ahead, gaining 1.79%. Fixed income, represented by the Bloomberg Aggregate, finished up by 0.57% for the week as yields moved slightly lower.  As a result, the 10 YR US Treasury closed at a yield of 4.42% (down ~8bps from the previous week’s closing yield of 4.50%).   Gold prices closed at $2,412.20/oz – up 1.90%.  Oil prices also continued moving higher, rising 2.3% to $80.06 per barrel.  

Last week’s PPI number was unexpectedly hot, with a 0.5.% rise in April over March.  However, downward revisions to prior months had Fed Chair Powell characterize the report as “mixed”.  When the CPI number came out on Wednesday the markets were pleased to see both CPI and Core CPI showing the promise of more cooling.  The CPI period rise of 0.3% was lower than the expected 0.4% and the annualized rate was on forecast at 3.4%.  The Core CPI period rate was on the forecast numbers of 0.3% for the period and 3.6% for the year, down from 3.8% annualized in April’s numbers.  As you might expect, investors were delighted with this and pushed markets higher.

This week is a light one for economic data.  Flash Service and Manufacturing PMI numbers, Durable Goods Orders and Consumer Sentiment are all reported late in the week. These reports are not major influencers, and no market reaction is expected. New home sales and weekly jobless claims will also be reported, and the FOMC Meeting Minutes will be released.  If the Minutes and some Fed speakers (three Governors making five appearance) have enough of a hawkish tone, it may throw some cold water on what has been a torrid market since the “mini-correction” ended on April 19. 

However, investors are maintaining their tendency to be optimistic no matter if data or the rhetoric is encouraging or challenging.  Despite rising multiples, persistent inflation and a tricky path to a lower interest rate environment, equity markets have risen strongly, and fixed income is producing yields that seemed impossible just two or three years ago.  Q1 earnings season is virtually over, and both the results and the outlooks were generally decent.  At the moment, it is hard to see what will stop the trend, but sooner, or later, we will know what it was!  

Maintaining discipline in asset allocation strategies is what wins the long game; we continue to recommend clients neither get neither too high nor too low as the markets and economy roll through the waves and cycles of change.

In New England the temperatures are finally starting to rise, too! Enjoy the week!

Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less. Marie Curie