May Economic Update
The market last month once again moved within a now narrower range, but the S&P 500 managed to post a slight gain of 0.27%. As the overall consolidation progressed, the market bounced up and down as daily news events unfolded. Wall street reacted negatively to inflation reports, a strengthen dollar, looming China trade concerns, and the Facebook Cambridge Analytica privacy leak. However, by the end of the month, positive economic data overcame these fears as consumer spending and confidence rose, oil rallied, and the Federal Reserve did not throw any curve balls. (1)
April welcomed the earnings season with many forecasts indicating strong reports which may lift the market. While the former turned out to be true, the latter was somewhat muted. Many stocks rose on their reports only to be sold back down within a day or two. Analysts and pendants alike attributed the reaction to unease about other long-term global concerns and that many of these stellar earnings reports were already priced-in to stock prices.
The China Trade War Eased, but Looms
On April 30, the Trump administration elected to delay the imposition of excise taxes on aluminum and steel imported to America from China, Mexico, Canada, Brazil, Argentina, Australia, and the European Union. Those tariffs were set to take effect on May 1, but they are now on hold until at least June 1st. (2)
As of this writing, both the United States and China have drawn hard lines in the sand. The stakes are high for each side – both politically and economically. It is likely that the market will remain in consolidation until the outcome of this international negotiation is made clear.
What’s in Store for May?
May has historically been a profit-taking month where prices wane before the summer season; but past performance does not indicate future results. With so many unknowns, the market will likely remain reactionary to news events and keep many investors and investment managers (present company included) to proceed with caution. Uncertainty had led us into this range-bound market, and only certainty will lead us out of it.