Investment Update June 4, 2024

Last Week on Wall Street

For the short holiday week, economic data included U.S. GDP growth being downgraded a few tenths, continued improvement in lower PCE inflation, higher home prices, and improved consumer sentiment.

Equities were mixed globally, with developed markets down a bit on net, while emerging markets fell further. Bonds were little changed domestically, while foreign markets saw mixed results. Commodities fell back across a variety of sectors.

U.S. stocks fell on the shortened week, but ended May with solid gains to offset weakness from the prior month. By sector, energy and utilities led the way with gains upward of 2%, while technology fell back by over -2% (as a positive week for some stocks was offset by weakness in Salesforce, Adobe, and Microsoft). Real estate also gained, with Friday’s ‘less bad’ inflation news providing a boost.

Foreign stocks were mixed, with gains in Japan offsetting declines in Europe similar to those in the U.S., with inflation coming in stronger than expected, which threatened the consensus view that the ECB will cut rates by a quarter-percent next week. The base case is that a rate cut will still occur, but doubt remains about the path forward through the summer and fall, with this stickier inflation. In Japan, inflation ticked up but remained below the central bank target. Emerging markets declined to a further degree for the week. Chinese PMI manufacturing data fell back again below 50 into contraction, which raised some concerns (again) about the durability of the recovery.

Bonds were little changed on the investment-grade side, with yields ticking up slightly higher across the U.S. Treasury curve. Subdued demand for 5- and 7-year Treasury notes mid-week could have been hampered by recent further Fed comments that rate hikes aren’t completely ‘off the table,’ although that was offset by better inflation readings later in the week. Foreign bonds were mixed, with little net change in the U.S. dollar index.
 
Commodities lost ground across the board last week, with agriculture and industrial metals down around -2%. Crude oil fell just under -1% on the week to $77/barrel, despite an expectation that OPEC+ members will choose to keep current production cuts in place. Natural gas also fell back -7%, with a lack of weather extremes to affect usage or shortages.
 
Fact of the Week
 
On April 22, 2024, the trial for the Feeding Our Future fraud scheme commenced. Feeding Our Future was a government-sponsored program aimed at providing ready-to-eat meals to local children across the nation. Federal prosecutors found that reported meals were overstated by thousands, resulting in an estimated $250 million in fraudulent funds paid out (source: Sahan Journal).

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