After a very impressive start to the year, the markets have capped off the month of May in disarray, posting the worst monthly returns since December of 2018. For the month, the S&P 500 and Dow Jones both traded down just over 6% giving back some of the gains we had achieved earlier this year. While the market has digested the notion that the FED is not going to strangle the economy by raising rates too quickly and that corporate earnings, while slowing, have still been positive, the threat of a trade war has veered its head again.
Uncertainty in trade relations with China and the unforeseen announcement of tariffs against Mexico have played pivotal roles in the recent deterioration of equities. As a result, the flood of investments into bonds have driven yields to increasingly lower levels, raising a concern over an inverted yield curve which is sometimes an indicator of rougher waters ahead.
What do we think? As I have mentioned to many of you, the positive growth in the recent market, although welcomed, was and is unsustainable and we are due for some type of correction. As witnessed earlier this week when the NASDAQ hit these levels. Did we hit the bottom? It’s too early to tell. Is it going to get better? Analysts and strategists feel that the upcoming G20 summit meeting will be the turning point in these negotiations and we should have a resolution soon. Regardless, we do not feel that the current environment will lead our economy towards a recession.
Opinions expressed are not necessarily those of Raymond James & Associates. Information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk and you may incur a profit or loss. No investing strategy can guarantee success. Past performance may not be indicative of future results. It is not possible to invest directly in an index.
The S&P 500 is an unmanaged index of 500 widely held stocks.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.
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