Investment Commentary
The mood of investors continued to turn decidedly more upbeat as the stock market rally that began in mid-February continued into May. The sharp stock market decline of more than 10% in the first 6 weeks of 2016 seems to be a distant memory with the MSCI World Index back to positive for the year after advancing 9.4% in the March-May time frame.
Stock market gains have been mirrored by a recovery in domestic economic data. Despite a sluggish 1st quarter GDP growth rate of +0.8%, second quarter US economic growth appears headed back into the 2-3% range. A strong durable goods orders, continued improvement in the housing sector, and the largest increase in consumer spending (which accounts for roughly 70% of US economic activity) in over six years all provided encouraging economic data points in May. While the recently encouraging economic data looked to give the Federal Reserve more justification to increase short-term rates in June, today's weak employment report makes it more likely that the Fed will leave rates unchanged at it's mid-June meeting.
After posting sharp gains in March and April, emerging market stocks reversed course in May with the MSCI Emerging Markets Index falling 3.9%. The loss was largely attributable (-2.9% of the -3.9%) to a strengthening US dollar which hurts overseas investments in US dollar terms. The reduced likelihood of a Federal Reserve rate hike given the weak US employment report provides the biggest boon for emerging market stocks as it stems the strengthening US dollar and assuages fears of more capital leaving foreign markets for the US.
We always encourage you to contact us if you have any questions about the markets or how your portfolio is impacted by the markets. Lastly, you can reference the RPG Monthly Market Snapshot by clicking here for some key economic data points and market returns.
|
|
|
