May Investment Perspectives
This month’s Investment Perspectives highlights some things that could go right for the economy and markets, a look at TIPS, and stocks and the midterm elections.
In this month's issue:
What Could Go Right - Mark Luschini
Much has been written, including in many of our publications, about the unusual degree of macroeconomic uncertainty that is serving to batter markets and render near-term prognostications futile.
The factors that are most unsettling include: inflation at a 40- year high, a Federal Reserve abruptly turning stingy, a global growth slowdown induced by the spillover from the war in Ukraine and China’s stringent “zero-tolerance” COVID policy, and the ubiquitous rise in interest rates that is beginning to infringe on business activity. Collectively, these have served to induce volatility and pressure stock prices even as the economy, and corporate profit growth, are expected to remain positive through the year, if not beyond.
Inflation (Un)Protection - Guy LeBas
Inflation is a perennial topic in notes focused on fixed income. No wonder: Inflation is, even in normal times, a major source of risk and return.
The topic has certainly appeared in many Investment Strategy Group reports in the past year. In the May 2021 Investment Perspectives, we pointed out that monthly inflation had likely peaked, but inflation had a long tail that would drag out into 2022. In a November 2021 report, The Supply Chain: Major Themes for Fixed Income Investing, we clarified some of the sources of this inflation.
Market in May: Rates, Midterms, and the Economy - Greg Drahuschak
Despite its reputation as a generally good month for stocks, last month produced the second-worst April results for the S&P 500 in the past 72 years. With the 4.2% drop on the final trading day of April, the Nasdaq Composite Index was down 21.16% for its worst start to a year on record. As usual, the market had to contend with various issues, but none was more influential than concern about how far the Federal Reserve Open Market Committee (FOMC) would go to adjust credit conditions.
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