Welcome to the monthly market update from Midland Wealth Management. I’m Chris Zabel, Portfolio Manager. Today, I wanted to take a few minutes to give you an update on the markets for the month of May.

Market Returns for May

The stock market rebounded in May after a rough April. The S&P 500 returned 4.96% in May and was able to fully recover its losses from April. The S&P 500 is now up 11.30% for the year. Small-cap stocks rebounded in May, as well. The Russell 2000 returned 5.02% and is now up 2.68% for the year.

GDP

The U.S. economy grew at a revised 1.3% for the first quarter, down from the previous estimate of 1.6%. The revised number was primarily lower due to consumer spending being revised lower.

Federal Reserve/Inflation/Interest Rates

The Federal Reserve met on May 1st and held its key interest rate unchanged. The Fed remains concerned about inflation and will continue to hold rates steady until inflation moves sustainably towards the 2% target. April’s core Personal Consumption Expenditure (PCE) rose by 0.2% month-over-month, which was the smallest monthly increase this year and it rose 2.8% year-over-year. Inflation continues to be sticky but is showing signs of moderating at a slow pace. The market’s expectation for rate cuts remains at one for the year and isn’t expected until December.

The 10-year Treasury saw some volatility throughout the month as the market digested the Fed’s remarks from their meeting and economic releases throughout the month. The 10-year Treasury yield did settle at 4.50% at the end of May, lower than the 4.68% at the end of April. With rates falling, the Bloomberg [U.S.] Aggregate [Bond] Index was up 1.70% for the month and is down 1.64% for the year.

Corporate Earnings

Earnings season is coming to a close and it has been a strong first quarter. With about 98% of companies reporting for the S&P 500, earnings grew by 7.80% in the first quarter. NVIDIA’s earnings were highly anticipated, and they did not disappoint with the earnings beating expectations.

Outlook

The labor market remains strong but personal spending is starting to see some pullback. Personal spending was up 0.2% in April, but it was lower than the 0.7% in March. Investors will be closely monitoring the Fed meeting June 12th and the release of the Fed’s dot plot for the Fed’s latest expectations on rates. We will also get an update on the latest jobs numbers on June 7th. U.S. Nonfarm Payrolls will be released, and the market is expecting the economy to add 185,000 jobs and the unemployment rate to be unchanged at 3.9%. As always, thanks for joining me for this month’s market recap.