The month of May proved to be better for stocks than many financial pundits predicted, with the S&P 500 rising 2.3% to close at an all-time high, and the NASDAQ rose 3.1% based on strength in some of the large technology companies throughout the month.
As usual, the data were mixed throughout the month, but the seesaw of economic reports tipped heavily in favor of positive news. Among the encouraging signs we saw in May were:
1. Durable goods orders were up 0.8% in April and up a revised 3.6% in March;
2. Consumer Confidence rose to 83 from 81.7, which is the second highest level since 2008;
3. Jobless claims ended the month around 300,000, after dipping below that mark at one point during May;
4. Existing home sales were up 1.3%, which was the first time this year that the figure showed an increase. The housing market showed further signs of strength with housing starts up 13.2%.
Among the relatively few disappointments for the month of May was the Q1 GDP reading, which showed that the economy contracted about 1%, which marked the first decline since Q1 2011. And the housing news wasn’t all good, as Zillow reported that 10 million homeowners were still underwater on their mortgages.
In addition, as we’ve written about before, we remain concerned about the price of gas and the impact that will have on the consumer. Although prices remain elevated, we hope that they have begun to stabilize. Looking year-to-year since 2011, the price of gas has gone from $3.53/gallon in 2011 to $3.61 in 2012, to $3.51 in 2013 and is currently up to $3.67. However, over the last two months, the price of gas has (hopefully) plateaued, going from $3.66 in April to $3.67 in May. (Source: US Department of Energy Informantion Administration). These numbers are worth watching, especially with the Summer travel season now upon us.
We hope that your Spring/Summer is off to a safe and fun start. Thanks for reading.
Carl Beck
June 2, 2014