Economic Update 5-20-2024
- In a busy week for economic data, most of which was keyed in on inflation, consumer and producer prices continued strong in April, but showed signs of stabilization. Retail sales and industrial production were little changed, while housing data was mixed.
- Equities rose globally with eased U.S. inflation and government stimulus in China. Bonds fared well as yields declined, especially in foreign markets due to a weaker dollar. Commodities were generally higher, led by metals and crude oil.
U.S. stocks experienced positivity all week, with the S&P 500 and Nasdaq back to new record highs, based on slow downward progress in inflation reports taken well by financial markets, in addition to mixed economic data that could be seen as pushing the Fed in a more dovish direction. Nearly every sector experienced a gain last week, led by technology up 3% (Apple and Nvidia, but also others), followed by health care and communications; on the other end, industrials lost a fraction of a percent last week. Real estate also fared positively, as interest rates fell back. The Dow Jones Industrial Average achieved the milestone of 40,000, which is not meaningful in and of itself due to the unusual and antiquated structure of the index, but the media often reports on these round numbers when reached. In a bull market, that may provide an extra sentiment boost, fueled by some ‘fear of missing out,’ for investors who haven’t been paying as much attention.
Foreign stocks performed in line with U.S. equities in developed markets, with Europe, the U.K., and Japan all performing similarly. On the negative side, the ECB pulled back on near-term rate cut expectations, while cuts in the U.K. look potentially more likely (with a weaker labor market). Central bank policy decisions continue to look closely tied to the U.S. Federal Reserve, without officials saying as much. Emerging markets fared even better, led by a 5% gain in Chinese stocks. Last week’s results were tied to a sizable rescue package intended to stabilize the property sector, by lowering down payments, loosening restrictions on mortgage rates, and providing additional funding to banks. In fact, since the end of January, China has outperformed nearly all other countries, up 30% over that span—with enticingly low valuations, better government support (and removal of some restrictions), and improvement in economic conditions from worse levels providing a catalyst.
Bonds experienced gains last week, along with falling yields, related to cooling inflation numbers. Investment-grade bonds and high yield performed similarly, with floating rate bank loans underperforming slightly. Foreign bonds saw better returns, helped by a weaker dollar.
Commodities were led by gains in industrial and precious metals, as well as energy, while agricultural prices fell back. Crude oil prices rose 2% last week to land near $80/barrel, along with slightly falling inventories.
|
Period ending 5/17/2024 |
1 Week % |
YTD % |
|
DJIA |
1.35 |
6.90 |
|
S&P 500 |
1.60 |
11.80 |
|
NASDAQ |
2.15 |
11.47 |
|
Russell 2000 |
1.79 |
3.90 |
|
MSCI-EAFE |
1.66 |
8.06 |
|
MSCI-EM |
2.71 |
8.32 |
|
Bloomberg U.S. Aggregate |
0.57 |
-1.40 |
|
U.S. Treasury Yields |
3 Mo. |
2 Yr. |
5 Yr. |
10 Yr. |
30 Yr. |
|
12/31/2023 |
5.40 |
4.23 |
3.84 |
3.88 |
4.03 |
|
5/10/2024 |
5.47 |
4.87 |
4.52 |
4.50 |
4.64 |
|
5/17/2024 |
5.46 |
4.83 |
4.44 |
4.42 |
4.56 |
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.