Recap: Slower Economic Growth?
Most major U.S. equity benchmarks closed lower over the holiday-shortened trading week, but still managed to end May with modest gains. Contrary to the past six weeks, value stocks outperformed growth stocks, and smaller-cap stocks outperformed larger-cap stocks.
The technology-focused NASDAQ struggled, largely due to Salesforce missing consensus estimates, outlining a pessimistic future, and experiencing a significant drop. Market movements were difficult to attribute to any single factor, as a mix of earnings reports, economic data, and possible profit-taking influenced the end-of-month trading.
On Friday, the Commerce Department released its Personal Consumption Expenditure (PCE) price index report. The report showed that Core PCE prices, which exclude food and energy and are the Federal Reserve’s preferred inflation gauge, rose 0.2% in April, slightly down from the previous two months.
Real gross domestic product (GDP) grew at an annual rate of 1.3% in the first quarter of 2024, according to the “second” estimate from the Bureau of Economic Analysis. This is a revision from the “first” estimate, which reported a 1.6% increase.
In comparison, real GDP grew by 3.4% in the fourth quarter of 2023. The revision was mainly due to a downward adjustment in consumer spending.
The slowdown in GDP growth from the fourth quarter to the first quarter was primarily due to slower consumer spending, exports, and state and local government spending, along with a decline in federal government spending.
Weekly Market Update Video
What’s Going On In Your Portfolio?
Last week, I raised some cash in client portfolios by locking in gains from areas like utilities and insurance.
I am now waiting for opportunities as the market digests the most recent economic data indicating that the economy may be on the verge of slowing.
Our allocation towards technology continues to be strong, as potential economic weakness could improve chances of rate cuts by the of the year by the Fed – which would be a positive for growth stocks.
Upcoming Economic Data to Keep an Eye On
Source: Trading Economics
