May Market Roundup

May finished up +4.80%, 2nd best month this year behind Feb’s +5.17% return and well above May’s historical average return of -0.06% and the best May since 2009 (+5.31%).

YTD we’re now up +10.64% - here’s the path we’ve taken to get here relative to bull markets during election years…

Looking ahead, June is up 57% of the time (55 out of 96) and when it’s up, it’s up +3.83% on average and when it’s down, it’s down -3.37%.

Looking ahead to the rest of the year, when we have a return of 10% or more through May, June is up +1.4% on avg and +2.1% on median,

The RoY is up ~8.0% on average/median. We’ve been up over 10% thru May in 26 of the years since 1928 (27% of the time).

Yields moved higher towards the end of the month, but did pull back a bit in the last day or two.

Core PCE, the Fed’s preferred inflation measure, rose +0.25% M/M in April and slowed to +2.75% y/y, the lowest since March 2021.

Spending posted its slowest rise in 3 months at +0.20% m/m, below forecasts for a +0.3% rise.

On a y/y basis, it slowed to +5.32%, continuing the decelerating trend but still above pre-covid levels…

The 2nd estimate of Q1 2024 US GDP was revised down to 1.25% from 1.59% in the preliminary estimate.

For the components: Imports were revised up to 7.65% from 7.19%. Private Domestic Investment up to 3.25% from 3.18%.

Consumer Spending was revised down to 1.99% from 2.51%, the main reason for the headline downward revision.

Exports were revised up to 1.16% from 0.91% and Final Sales down to 1.71% from 1.95%.

Here are their contributions: with that downward revision, Consumer Spending shrunk from 1.68% to 1.34% of the 1.25% (investment & net exports were drags).

Within consumer spending, Goods saw a big downward revision to -1.86% from -0.43% in the 1st estimate.

Services spending was revised only slightly lower to 3.93% from 3.9%.

As measured by Core PCE, inflation was revised down to 3.65% from 3.73% and the 4q average down to 2.85% from 2.87%, lowest since Q1 2021.

Here’s the PCE Price Deflator for Total Spending and then broken out by Goods and Services.

As you can see, in Q2 2022, the driver shifted from Goods (gold) to Services (lighter blue). Goods have had a disinflationary effect the last 2 quarters, in fact.

We also got Corporate Profits which were down -1.74% q/q, solidly below forecasts for a +3.9% rise.

On an absolute basis, they’re at $2.75trillion, down from Q4 2023’s record high of $2.80t.

But they accelerated on a y/y basis to +6.41%, the biggest rise since Q4 2022.

More on household debt below, but the rate on credit cards has surged to 21.6% vs the long-term median of 13.6%.

This is very painful if you don’t pay off your balance in full every month...

April CPI out today, came in below forecasts at +0.31% m/m vs 0.4% expected – nice to see a cooler than expected reading after a few hot ones.

With a +0.43% m/m figure rolling off, the y/y figure slowed to +3.36%...

Core CPI came in roughly in line at +0.29% m/m vs 0.3% forecasted, the smallest in 4 months.

The y/y figure slowed to +3.62%, the slowest rate since April 2021!

Globally, we just got Germany’s CPI for May which ticked up to 2.4% y/y, the fastest since Feb. Here are some other global CPI figures.

As you can see, the US is at the top of the pile at 3.36% y/y for Headline CPI.

TSA traveler throughput for 2024 surpassed 2023 figures, posting a +7% rise to 23.7mil persons.

Here’s the path of the days we counted…

Not directly related to TSA figures, but still travel-related, here are memorial day gas prices since 2010…

On the volatility side, the VVIX (volatility of the VIX) got all the way down to 73.3 on May 10, lowest since May 2015!!

The VIX itself got down to 12.0 on May 17, lowest since November 2019!

After those lows, we’ve seen a bit of a jump in volatility in the last couple days, though, both in the US VIX as well as the intl VIX indices we track (Hang Seng not quite as much).

?A bit dated and we get May’s figures next week, but the April nonfarm payrolls report came in at +175k jobs added, , below forecasts for a 243k reading and the smallest rise since Oct 2023.

The Unemployment Rate ticked up to 3.9%, above expectations for an unchanged 3.8% reading.

The Participation Rate was unchanged at 62.7%. Wages rose just +0.20% m/m, slowing to +3.92% y/y, the smallest increase since May 2021!

Here’s the m/m picture for NFPs – good to see the 6mo average stabilizing...

The participation rate for the 25-54yo cohort ticked up to 83.5% in April while the overall rate was unchanged at 62.7%.

For women aged 25-54, the participation rate hit 78.0, an all-time high! For men 25-54yo, the rate declined to 89.1.

?One bigger story in the last several months was the increase in govt payrolls, April saw a scant +8k gain in govt employment, the smallest rise since Dec 2022!

We got the NY Fed’s Q1 2024 report on household debt, which rose by +$184bil q/q.

?Mortgage debt rose +$190bil, most in a few quarters – this tells me that consumers are acclimatizing to higher mortgage rates and getting back into the market.

While credit card debt actually declined q/q -$14.0bil, the first decline in a couple years.

From a delinquency standpoint, Current has declined to 96.8%, lowest since Q3 2020 – starting to see cracks on the delinquency side.

Severely Derogatory is up to 1.27%, highest since Q2 2022. 30 days late has been trending higher, as have the other late categories, albeit slowly.

Pending Home Sales plummeted by -7.66% m/m in April, the biggest drop since Feb 2021 and well below expectations for a -0.6% dip.

Initial unemployment claims rose to 219k towards the end of May, slightly above expectations for a 218k reading.

The 3mo moving average is up to 215k, the highest since Nov 2023.

Continuing claims ticked up to 1.791mil, the highest in 6 weeks.

Diesel prices have declined for 7 straight weeks, down to $3.76/gal to their lowest level since early 2022.

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The build continues in the Strategic Petroleum Reserve, but it’s still very low relative to history.

The y/y figure is up to +3.90%, though, the highest in nearly 20 years!

SPX / Russell 2000 simple price ratio back 2.59, tied for highest (with Nov 10 2023) since October 3 2001!!!

S&P 500 Growth has been outperforming Value of late, with the simple price ratio going from 1.42x on April 19 to 1.99x, the highest since April 6 2022!

Over that time frame, S&P 500 Growth is up +10.5% while Value is up +0.7%.

Chicago PMI fell to 35.4 in May, lowest since covid and far below forecasts for a 41-42 reading. In the last 6 months, it’s fallen from 55.6 to 35.4.

?Performance tables:

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