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May's record-breaking market performance elicits optimism

Positive corporate earnings and greater participation from sectors other than technology carried stocks forward.

May was a month of milestones, with all three major U.S. equity indexes hitting new highs – and markets in the U.K., India and Germany also setting records. Stocks were driven up by positive corporate earnings results and greater participation from sectors other than technology – and stocks other than the MAGMAN six tech stocks – with 10 of 11 sectors having positive performance. 

“This was the first quarter since the fourth quarter of 2022 that the other 494 stocks in the S&P 500 had positive earnings growth,” Raymond James Chief Investment Officer Larry Adam said. “In addition, big tech stocks continue to be driven by tailwinds from artificial intelligence. Even the utilities sector saw a performance boost from AI energy demand in May.”

With inflation moving slowly toward the Federal Reserve’s (Fed’s) 2% goal and the economy proving resilient, interest rate cuts are likely to be further delayed, which will continue to put downward pressure on the real estate market.

The Congressional Budget Office released new estimates for the cost of extending the 2017 Tax Cuts and Jobs Act individual tax cuts, raising new questions as to what the tax debate might look like next year as the extensions are set to expire.

Before we dive into the details, let’s take a look at the year-to-date results:


12/29/23 Close

5/31/24 Close*

Year to Date

Year to Date




+996.78 +2.64%




+1,723.67 +11.48%

S&P 500



+457.68 +9.60%




+114.46 +5.11%

Russell 2000



+43.06 +2.12%

Bloomberg U.S.
Aggregate Bond Index



-35.72 -1.65%

*Performance reflects index values as of market close on May 31, 2024.

U.S. economy remains stable

The Consumer Price Index increased less than expected in April, signaling a slowdown in inflation, and although employment growth slowed considerably in May, it remained robust compared to the historical average, growing by 175,000 new jobs. Private jobs posted an increase of 167,000. Mortgage rates continue to weigh on housing starts, existing home sales and new home sales, which were all weaker than expected in April.

Treasurys balance on Fed action

After a strong start to the month, supported by a softer April inflation report, Treasury yields resumed their upward march as better than expected economic activity, hawkish rhetoric from the Fed and softer demand weighed on sentiment. The market is in a wait and see mode and the 10-year Treasury yield may remain within a tight range until something causes it to move.

Equities trending up, but volatility ahead

With the S&P 500 up 50% over the last 400 days, consolidation is not unexpected, especially considering investor uncertainty on the pace of disinflation and the timeline of Fed actions. The path to inflation normalization is unlikely to be smooth, so while equities may be in an uptrend, some fluctuations along the way are possible.

Biden administration raises Chinese tariffs

Trade remained a key issue in May, with the Biden administration unveiling tariff hikes on around $18 billion of Chinese imports across strategic tech sectors including electric vehicles, batteries, solar products, semiconductors and critical minerals. The administration also maintained existing duties on around $300 billion of Chinese goods.

Oil prices cool down, but risk remains

Spiking oil prices in April, bolstered by fears of all-out war between Iran and Israel, cooled off in May, just as the summer driving season began. Now the oil market is less focused on the situation in the Middle East, but the Russia-Ukraine war still presents physical risks to the oil supply as Ukrainian drones continued attacking Russian oil refineries, disrupting the processing of fuels in the world’s largest oil-producing country.

Lower rates likely in euro zone and Canada, less so in U.K.

The European Central Bank seems poised to make a rate cut in response to the slow-paced economic recovery, following its Swiss and Swedish counterparts. Canada’s inflation rate is now within the Bank of Canada’s target range, so the central bank may lower interest rates to bolster the shaky Canadian economy. Inflation in the U.K., although falling, remains too high for most rate-setters, suggesting the Bank of England will not lower rates immediately, to the chagrin of the Conservative government ahead of a July 4 general election.

The bottom line

May’s market performance elicits optimism, but volatility is always a possibility – especially with the continued uncertainty regarding inflation, interest rates and international conflicts.

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australasia and Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small-cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. U.S. government bonds and Treasury notes are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury notes are certificates reflecting  intermediate-term (2 -10 years) obligations of the U.S. government. Companies engaged in business related to the technology sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. MAGMAN stocks is a term used to describe six of the current largest and least volatile technology companies listed on the NASDAQ – Microsoft, Apple, Google, Meta, Amazon and Nvidia.

Material created by Raymond James for use by its advisors.