May 2024 Market Recap

We are excited to share insights from the Wealth Management Investment Strategy Group (ISG).

Major stock markets moved higher in May, a welcome change from April’s poor performance. Although Federal Reserve officials have taken a more hawkish stance, weaker economic activity and inflation data in the US helped alleviate fears that the Fed will keep monetary policy restrictive for an extended period.

Here’s a recap on what happened in the market and economy.

The markets: up

Global stocks were up in May. The S&P 500 notched a new all-time high in May and finished the month up 5.0%. Non-US and Canada developed markets returned 4.0%, while emerging markets gained a more modest 0.6%. 

Bonds saw mixed performance. The 10-year US Treasuries recovered from the sell-off in April but weakened again later in May due to more restrictive Fed speak, lower demand for Treasuries, and lingering concerns about the US fiscal outlook.

The economy: mixed

The US economy is beginning to show signs of easing, particularly in consumer spending – both retail sales and personal spending slowed in April and came in below consensus expectations. This trend continued in May, with retail sales softening further.

The labor market remains mixed – the economy added 165,000 jobs in April, well below the average monthly pace of 267,000 new jobs in the first quarter of 2024. However, the economy created 272,000 jobs in May, far above market expectations. Goldman Sachs Research attributes part of May’s hotter jobs number to the longer-than-usual May payroll month. 

The unemployment rate changed little at 4.0% in May from 3.9% in April. In addition, May’s annual growth in average hourly earnings ticked up to 4.1%, a slight increase from 4.0% in April.

ISG believes the strong labor market with unemployment near historic lows puts a floor under economic growth, which they expect to slow to near trend in the second half of the year.

Considering these factors, ISG believes that inflation will continue to ease, albeit gradually, and that the Fed will need to see inflation cool further before they consider interest rate cuts. Several Fed officials emphasized patience in pursuit of greater confidence that inflation is on a sustainable path to 2%.

Note, core inflation (measured by the consumer price index) for May, released on June 12th, provided reassurance as it was the lowest monthly inflation print this disinflationary cycle and consistent with at-target 2% annual inflation.

What are we watching over the month ahead?

ISG is closely monitoring the meetings of the major central banks in June, the EU Commission’s proposal for tariffs on imported electric vehicles from China, along with the European Parliament elections.