Markets, Economy

Weekly Kickstart (06/03/2019-06/07/2019)

6/3/19 8:00 AM

iStock-626627280.jpgStocks continued lower last week, as the S&P 500 fell by 2.62 percent to 2,752.06. That still left the benchmark index up 9.78 percent 2019-to-date, and 6.58 percent below the all-time closing high hit on the last day of April. Due to that unique timing, performance during the month of May for the S&P 500 also equaled a decline of 6.58 percent, the first and largest drop since December 2018’s 9.18 percent plunge. Moreover, last month’s selloff increased the max peak-to-trough drawdown for this year to 6.58 percent, not particularly fun for anyone who went long at the interim top but still relatively low by historical standards. There have now been over two dozen corrections in the S&P 500 of at least 5 percent since the March 2009 low. They each at the time might have felt like the end of the world to investors, but the market's resiliency is well-demonstrated.

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For some additional encouragement, when equities surge during the first four months of a year and pull back in May, it often bodes well for performance during both June and the remainder of the year. However, favorable statistics are still not a guarantee, and it seems unlikely that volatility will be going away anytime soon given the latest escalation in the trade war and uncertainty surrounding monetary policy, the debt ceiling, and numerous other issues. With respect to the Federal Reserve, traders will be paying close attention to the FOMC meeting later this month because it will include the next quarterly update to the committee’s economic projections. Fed funds futures currently imply a 90 percent chance of at least one rate cut occurring this year, and the market will want to see the revised dot plot come much closer in line with such expectations. In summary, the long-term prospects for the stock market remain encouraging, but there are a lot of potential catalysts to keep volatility elevated in the near-term. Any regular investors unsure how to navigate this environment should consider working with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last (holiday-shortened) week, the positives included that the 30-year mortgage rate slipped to a 16-month low, housing inflation cooled, Americans’ incomes rose, personal spending firmed, and consumer confidence improved. As for the negatives, the nation’s trade deficit (in goods) widened, mortgage applications slid, pending home sales fell, the Fed’s preferred inflation measure ticked higher, gauges of regional manufacturing activity continued to send mixed signals, and U.S. gross domestic product growth during the first quarter of 2019 was revised slightly lower. This week the pace of economic data picks up with a few important reports on factory output, construction, credit utilization, service sector activity, productivity, and employment scheduled to be released. That includes the potentially market-moving May job report from the U.S. Department of Labor due out on Friday.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Tuesday

Wednesday

Thursday

Friday

 

 

Sources: Econoday, Pension Partners, Twitter, TSTA, CME, FRBSL

Post author: Charles Couch

Disclosures