May 2023 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I just wanted to spend a few minutes to give you an update on the markets for the month of May.

Market Returns for May

Stocks extended their gains for the year in the month of May, as a small number of mega-cap stocks continue to be the main drivers of gains this year. The technology-heavy NASDAQ index was up nearly 6% in May and the S&P 500 gained about 0.43% in May and is now up about 9.63% for the year. The trend continues, as a small grouping of mega-cap stocks are behind most of the S&P 500’s 2023 rally, as investors continue to be drawn to the attractive growth potential of the emerging artificial intelligence theme. Last week, the semiconductor company NVIDIA soared after it raised its revenue guidance well above analyst expectations. In fact, if you take out the top 7 stocks in the S&P 500, the remaining S&P 493 is virtually flat to slightly down for the year. Interest rates moved higher in May, which drove the Barclays Government/Credit index lower by about 0.74% for the month and the 10-year Treasury moved slightly higher to a yield around 3.6%, down from its high this month of 3.85%.

Debt Ceiling Update

Equities have been fairly resilient during the latest debt ceiling debate and headlines suggest that a deal may be close, as the House has just passed the bill and now they are waiting for the Senate to cast their vote which may be this weekend. The date when the Treasury could essentially run out of cash is estimated to be around June 5th.

Federal Reserve Forecast

As you look past the debt ceiling, investors will be closely watching the economic numbers leading up to the next Federal Reserve meeting on June 14th. The Fed Funds rate is currently 5 – 5.25% and investors are currently pricing in a probability of a 60% chance the Fed raises rates again in June by about 0.25%. On Friday, the U.S. employment report is expected to see jobs grow by about 188,000 and for the unemployment rate to slightly tick up from 3.4% to 3.5%. The Federal Reserve will also get one more look at inflation numbers which will be released on June 13th.

Outlook

The economic outlook continues to be mixed. Both job openings and the unemployment rate remain strong as the unemployment rate is at 3.4% which is at a 50-year low. The biggest part of the U.S. economy showed positive signs in May, as Americans are still spending on services and experiences. However, several retailers including Home Depot, Target, Advance Auto Parts gave a cautious outlook and are expecting weaker consumer spending in the future. We will be constantly monitoring the economic data, Fed interest rate decision coming up in June, banking confidence, debt ceiling debate, and the upcoming jobs number this Friday. As always, thanks for joining me for this month’s market update and if you have any questions about investments, financial planning, retirement projections, or estate planning, please do not hesitate to give us a call.