May 2023 Market Review & Commentary

We hope you are well and that you had an enjoyable & reflective Memorial Day weekend. I would like to begin this monthly update by personally thanking all of you that have served our great country including your loved ones that supported you in your service. And thank you to all families who have had to endure the ultimate sacrifice of a loved one for our personal freedoms. During everyday life, it is easy to not pause to think about the immense cost of our great blessings and we humbly say, “thank you”!

May 2023 Market Review:

As I outlined in last month’s update, our eyes in May were on a few key areas; the Debt Ceiling, the Credit Markets, Employment Data, and overall US economic health. I jokingly compared these to the arch nemeses of my beautiful spring lawn. Just like my lawn, the markets in May had a real battle on their hands.

We began the month of May with the Federal Reserve, as expected, increasing short-term interest rates by 0.25%. These rate increases, which methodically began back in March 2022 have not yet derailed lending or liquidity within the credit markets. In addition to credit market stability, we saw a slight improvement in unemployment data from 3.5% to 3.4% and a slight adjustment up in wage growth. If you combine the good unemployment data with the relatively level Inflation reading of a 0.4% increase, you can make the case that the US economy is holding strong. To further prove the strength shown by the economy, 78% of reporting S&P 500 companies provided positive earning calls, which is the best since the 4th quarter of 2021. Many of the earnings were driven through increased expense controls and increased discussions around AI technology and potential integration.

All this positive (or not as bad as we thought) news could have set up for a historical May, but no one could escape the Debt Ceiling dance playing out in Washington. As this uncomfortable dance unfolded over the entire month, markets seemed to react to every debt ceiling headline, this created a very uncomfortable situation for many investors and areas of the markets. Many sectors struggled in May with the following sectors taking the brunt; Utilities (-6.55%), Energy (-8.13%), Healthcare (-4.42%), and Consumer Staples (-5.89%). Only three sectors were positive, with Communication Services (+4.87%) and Technology (+10.39%) leading the way.

All these on-going events created a conflicting overall outcome. The DOW Jones Index pushed into negativity territory for the year (-0.68%) by finishing the month of May down (-3.49%) while the S&P 500 ended positive (+0.25%). The Nasdaq fueled by the AI boom finished the month (+5.80%).

As we look forward, our attention will be on the FOMC meetings which will conclude on June 14th, the continued fluidity of the credit markets, employment data and continued readings of the overall health of the economy.