Stock Gains Cap off Strong May; Bonds Rally

Good morning, and welcome to June already!

The Dow (+0.9%), NASDAQ (+2.4%), S&P 500 (+1.4%) and EAFE (+1.1%) all exhibited gains last week.  Similarly, strong gains were seen by bonds, as taxable bonds gained 0.8% and tax-free municipal bonds gained 1.0%.  The 10-year Treasury yield fell 0.12% to finish the week at 4.44%.  The old saying, “Sell in May and go away” didn’t hold true this year, as May posted strong gains in the stock market, with the Dow, NASDAQ, and S&P 500 gaining 2.8%, 8.4%, and 5.3%, respectively.  That’s a nice recovery following a dismal March, as all three indices have reached all-time highs.

Earnings season is now over, and corporate earnings were very strong.  Sentiment in AI has been resurrected, driving greater interest in technology stocks, but not just the Magnificent 7.  That is evidenced by the 8% return on the NASDAQ for May and a 15% rise in the technology sector (especially semiconductors), driving all indices higher.  Additional investor enthusiasm occurred last week as Iran and the US were seemingly close to an agreement to end the war and open the Strait of Hormuz.  As a result, oil prices have fallen from their peak of $112 per barrel to now under $90 per barrel.  This is still high compared to around $60 per barrel before the conflict.

Now the bad news.  The elevated price of oil has an immediate effect on the price of gasoline, which hurts all Americans by driving up inflation.  The increase in gas prices is “advertised” all over the place as we all drive by multiple gas stations on a daily basis showing their prices.  However, oil prices trickle down throughout the economy in many other ways, as transportation costs for goods rises, as well as the cost for manufacturing many daily use items such as plastics.  I just read that even if they opened the Strait of Hormuz today, it would take four months to reach 80% of the prior flow, and that returning to the prior flow of oil would take until the first or second quarter of 2027.  This will certainly create inflationary pressure on the US, but if there is any one thing we have learned, the US economy and its consumers are quite resilient.

Have a great day and rest of your week!

^{Source:  Yahoo Finance}

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}

^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}