Rally Back on Track

May 31, 2024

April is historically one of the best months for stock market performance and May is one of the worst.  This year that reversed, with normally strong April seeing more than a 4% decline in the S&P 500 while May featured numerous new all-time highs for all the major indices.  The primary market drivers were excitement about the growth and profit potential from artificial intelligence and the belief that the Federal Reserve is done raising interest rates and their next move will likely be to lower rates.  From mid-April through late May we saw the S&P 500 gain ground for 5 consecutive weeks, but rising interest rates during the last week of the month put a damper on the rally.  At month end the S&P 500 had gained 4.8% and is now 10.7% higher for the year.  Interest rates that had steadily been declining from late April through mid-May ended the month where they started.  Oil prices have been declining since early April and were lower in May while gold continued its historic rally.

We began the month on a Wednesday in the middle of the busiest week for earnings reports this quarter.   Fed Chief Powell said they are unlikely to raise rates going forward and widely owned Apple jumped 8% after a strong quarterly report.  At the end of the first 3 days the S&P was up .5%.  The first full week of trading saw a plethora of corporate earnings reports, mostly better than anticipated, and both interest rates and oil prices moved lower.  The positive backdrop pushed the S&P 500 to its best week in May with a gain of 1.9%.  The corporate earnings tsunami continued during the second full week of trading, but the most important report was the consumer price index for April and when that showed inflation dropped for the first time since January the major indices rallied to new all-time highs.  At the end of the week the S&P had managed to gain another 1.6%.  During the third full week we saw a slowing in volume as traders wound down to the long Memorial Day weekend.  The big story for the week was earnings from artificial intelligence (AI) chipmaker Nvidia.  AI has been driving this rally and Nvidia is the leader in AI, so and when their quarterly report was much stronger than even the most optimistic estimates, that stock exploded higher and took the S&P along for the ride.  Near the end of the week, we started to see interest rates move higher and that put a damper on the rally, leaving the S&P unchanged on the week.  Interest rates continued to move higher during the holiday shortened final week of the month and that weighed on all the major indices sending the S&P down .5% during the final week.

The market has traditionally rallied during the 3 summer months, but this year a lot is going to depend on interest rates, oil prices and geopolitical events.  AI has driven tech stocks to valuations that are higher than the historic average, so we need to continue seeing progress in that area.  In addition, the recent rally has been based on the belief interest rates are not going much higher, so it is important we do not see a continued rise in rates.  Lastly, the media is paying less and less attention to the war in Ukraine and the market would benefit from a continued stalemate there.  It does appear the path ahead for the market is higher and we will be buyers of any tradeable dip.

If you know someone who would be interested in learning more about Greenberg Financial Group, please contact us at 520-544-4909, or visit our website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.  Previous radio shows are available by going to www.iheart.com or using the iHeart app and typing Money Matters with Dean Greenberg.